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# Basic Income Studies

Ed. by Haagh, Anne-Louise / Howard, Michael

CiteScore 2018: 0.47

SCImago Journal Rank (SJR) 2018: 0.111
Source Normalized Impact per Paper (SNIP) 2018: 0.053

Online
ISSN
1932-0183
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Volume 12, Issue 2

# The Cost of Basic Income: Back-of-the-Envelope Calculations

Karl Widerquist
Published Online: 2017-12-07 | DOI: https://doi.org/10.1515/bis-2017-0016

This article shows how the cost of Universal Basic Income (UBI) is often misunderstood and greatly exaggerated. It then presents simple, “back-of-the-envelope” estimates of the net cost of a UBI set at about the official poverty line: $12,000 per adult and$6,000 per child with a 50 % “marginal tax rate.” These back-of-the-envelope calculations present a greatly simplified UBI scheme meant not as a practical proposal but as a method to obtain a ballpark estimate of the cost of UBI in isolation. Even with simplifying assumptions, these figures are several times more accurate than many common but exaggerated estimates. Key findings of this study include the following. The net cost — the real cost — of this UBI scheme is $539 billion per year: about one-sixth its often-mentioned but not-very-meaningful gross cost of about$3.415 trillion. The net cost of this UBI scheme is less than 25 % of the cost of current U.S. entitlement spending, less than 15 % of overall federal spending, and about 2.95 % of Gross Domestic Product (GDP). The average net beneficiary is a family of about two people making about $27,000 per year in market income. The family’s net benefit from the UBI would be nearly$9,000, raising their income to almost $36,000. This article offers supplementary material which is provided at the end of the article. ## References • Bergmann, B. R. (2004). A swedish-style welfare state or basic income: Which should have priority?. Politics and Society, 32(1), 107–118. • Congressional Budget Office. The distribution of household income and federal taxes, 2013. Washington, DC: Congressional Budget Office 2016.Google Scholar • Dinan, K. A. (2009). Budgeting for basic needs: A struggle for working families. New York, NY: National Center for Children in Poverty, Columbia University.Google Scholar • Forget, E. L. (2011). The town with no poverty: The health effects of a Canadian guaranteed annual income field experiment. Canadian Public Policy, 37(3), 283–305. • Greenstein, R. (2017). Universal basic income may sound attractive but, if it occurred, would likelier increase poverty than reduce it. Policy Futures, 1–5.Google Scholar • Pereira, R. (2017). The cost of universal basic income: public savings and programme redundancy exceed cost. In R. Pereira (Ed.), Financing basic income (pp. 9–45). New York, NY: Palgrave Macmillan.Google Scholar • Proctor, B. D., Semega, J. L., & Kollar, M. A. (2016). Report number: P60-256: Income and poverty in the United States: 2015. In U.S. Census Bureau (Ed.). Washington, DC: U.S. Census Bureau.Google Scholar • Social Security Administration. Monthly statistical snapshot, December 2015. Washington, DC: Social Security Administration 2016.Google Scholar • Social Security Administration. (2017). The Social Security Administration. Washington, DC: Social Security Administrative Expenses.Google Scholar • Tcherneva, P. (2017). At issue: Should the United States adopt a Universal Basic Income?. Congressional Quarterly Researcher, 27(31), 741.Google Scholar • Tcherneva, P. R. (2006). Chartalism and the tax-driven approach to money. In P. Arestis & M. C. Sawyer (Ed.), A handbook of alternative monetary economics (pp. 69–86). Cheltenham, UK: Edward Elgar Publishing.Google Scholar • U.S. Census Bureau. Table 540. Government transfer payments to individuals by type: 1990 to 2009. Excel. Washington, DC: The Census Bureau 2011.Google Scholar • U.S. Census Bureau. Hinc-01. Selected characteristics of households, by total money income in 2015. Excel. Wasington, DC: U.S. Census Bureau 2016a.Google Scholar • U.S. Census Bureau. Poverty thresholds for 2015 by size of family and number of related children under 18 years. Washington, DC: U.S. Census Burea 2016b.Google Scholar • U.S. Census Bureau. Table Hinc-06. income distribution to$250,000 or more for households: 2015. Excel. Washington, DC: U.S. Census Bureau 2016c.Google Scholar

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Published Online: 2017-12-07

Citation Information: Basic Income Studies, Volume 12, Issue 2, 20170016, ISSN (Online) 1932-0183,

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© 2017 Walter de Gruyter GmbH, Berlin/Boston.