Universal basic income is a growing part of America’s policy conversations, as lawmakers and economists look for ways to reduce poverty.
Popular among many Silicon Valley tech leaders and economic policy experts, the model offers participants recurring cash payments, no strings attached. They can spend the money however they choose.
Basic income has been piloted over 100 times across America, and even more around the world. Advocates say that the cash — which could give all households an income floor — could be a key to reducing wealth inequality and strengthening the social safety net.
“What we’re doing is betting on families, betting on families that are used to being bet against, and betting on families’ ability to know how to manage their money,” Melvin Carter, mayor of St. Paul and member of the advocacy network Mayors for a Guaranteed Income, previously told Business Insider.
UBI, however, differs from guaranteed basic income. UBI means that every resident of a municipality or country would receive cash on an ongoing basis, regardless of household earnings. But GBI programs are typically limited to participants who are low-income or fit a specific demographic — such as single parents or artists — and offer cash payments for a set period of time, often one to five years. Most basic income pilots in the US have been short-term GBI trials, not UBI.
Still, the basic income pilots and their subsequent research reports provide insight into how cash payments would work in practice — and whether large-scale UBI could be realistic or worth the cost.
BI broke down the pros, cons, and frequently asked questions about basic income.
What are the benefits of UBI?
Universal basic income and guaranteed basic income could fill gaps in the existing US social safety net, experts said. Right now, this includes programs like SNAP for food, housing vouchers for rent, and Medicaid for healthcare.
While safety nets give low-income Americans access to necessities they might not otherwise be able to afford, most programs restrict the spending to specific categories. For instance, if someone’s car breaks down and they no longer have transportation to work, they wouldn’t be able to divert SNAP or housing voucher dollars to pay for those necessary repairs.
A benefit of basic income is the element of choice, according to Shafeka Hashash, associate director of guaranteed income at the Economic Security Project. Participants can spend the money on whatever they need most: an electricity bill, car repairs, a new crib for their baby, school supplies for their kids, steady childcare, or a grocery trip.
Everything is showing that these families are able to pay bills, switch careers, save for the future, spend time with their kids,” Hashash said, adding that this proves guaranteed income works. “It’s not always the most easy thing to quantify in a data point. And that’s why it’s so important to hear folks’ stories.”
Aside from helping families afford necessities, basic income pilots have shown that cash assistance can improve participant mental health, and give people the stability to work one higher-paying job instead of several lower-paying gigs. What’s more, studies in Los Angeles and Illinois have found that lowering economic stress can reduce instances of child abuse, neglect, and domestic violence.
What are the disadvantages of UBI?
Critics of basic income typically point to the high cost of running UBI and GBI programs. It costs millions of dollars a year to run a basic income program for a just few hundred people. Some economic experts and lawmakers argue that the potential benefits of cash payments don’t outweigh the expense.
Some of this criticism has to do with where the money for basic income comes from. While some basic income pilots are funded by philanthropy and private donors, others are financed by local or federal governments — potentially having an impact on taxpayers. Lawsuits in Texas and Missouri have halted basic income programs, calling their use of public money to fund cash payments for city residents “unconstitutional.”
Politicians in Arizona, Iowa, South Dakota, and more have also opposed basic income, calling the idea “socialist” and a “one-way ticket to government dependency.”
“I think the Founding Fathers would say that is very contrary to our capitalist system and encouraging people to work,” Arizona State Rep. John Gillette previously told BI.
To be sure, many low-income people struggle to improve their circumstances because of holes in the social safety net. The federal poverty line is outdated, and people might lack access to resources because of where they live, systemic racism, and generational poverty.
Guaranteed basic income pilots are also temporary and don’t always have lasting benefits. Participants may experience financial gains while receiving payments but backslide once payments stop. But UBI isn’t restricted to a specific timeframe, so those programs might not see the same issues.
Would UBI raise taxes?
Universal basic income might raise taxes — but it’s complicated.
So far, each US basic income pilot is financed differently. Private donors often fully or partially fund basic income programs, lessening the cost burden on local governments. In other cases, existing federal budgets like the American Rescue Plan Act and Temporary Assistance for Needy Families have been used to fund cash payments.
There are also other ways to fund basic income that won’t directly impact everyday taxpayers. Some economic researchers have suggested funding basic income with a carbon tax on major corporations or a value-added tax on goods and services. Other experts envision UBI being paid for alongside a progressive tax system, meaning high-earners would pay more taxes toward UBI than middle-class or lower-income families.
Still, with so many economic factors at play, it’s difficult to definitively predict how basic income would impact what Americans would owe.
How much would UBI cost in the US?
It’s challenging to put a clear price tag on universal basic income. True UBI — providing recurring cash payments for all Americans without a set time period — is largely theoretical.
Famously, 2020 presidential candidate Andrew Yang proposed a Freedom Dividend, which would give $1,000 monthly to every American adult over the age of 18. Per the Census, there are about 250 million Americans over 18, making the total gross cost of that plan over $3 trillion dollars each year. Most city-level guaranteed basic income programs cost millions of dollars annually, depending on the size and frequency of payments, pilot length, and number of participants.
But the literal cost of giving people monthly cash payments doesn’t account for all the ways UBI could boost economic growth.
Asya Howlette is the director of the New Orleans Mayor’s Office of Youth and Families and helped oversee a basic income program for young people in the city. She previously told BI that participants invest their funds back into their local communities. With a higher monthly income, participants are more likely to spend in the consumer economy or start their own businesses.
“It’s improving our economy because all of the money that these young people were using is going right back into our economy,” she said. “It’s not like they’re sitting on a lot of cash, they’re spending it right back in our grocery stores, they’re putting it right back in our small businesses.”
A study published in June 2024 by researchers at the University of British Columbia estimates that widespread UBI could increase the global GDP by 130%.
With basic income, people might also be less likely to need traditional social services — programs that taxpayers and governments are already paying for.
In terms of inflation, it’s possible that basic income could impact rates, but there’s not enough research to clearly determine if and how costs of living would increase.
Has UBI ever worked?
Basic income trials in the past decade have shown that cash payments can have clear benefits for participants. In Denver, participants experiencing homelessness saw an increase in housing stability over the pilot’s control group. And, in Atlanta, participants receiving basic income were more likely than the control group to pay their electricity bills on time and have access to regular meals.
While true UBI hasn’t been tried on a large scale, similar programs do exist. For example, the Alaska Permanent Fund provided $1,312 per person in 2023 to all residents, regardless of socioeconomic status. The Permanent Fund is paid for through the state’s oil revenue and has been running since the late 1970s.
However, experts have told BI that basic income works.
“This is a way to make sure that we live in a civilized place where everyone has a floor,” Michael Tubbs, founder of the advocacy network Mayors for a Guaranteed Income, previously told BI.
From a research standpoint, however, some experts caution calling basic income trials a complete success or failure. Because cash payments are given to people with diverse circumstances in uncontrolled environments, there are many factors besides basic income that affect their financials, like inflation or fluctuating housing costs.
What countries and states have UBI?
US states with active basic income programs include California, Illinois, Colorado, New York, Georgia, Louisiana, and more. Some pilots focus on specific demographics: parents with young children, pregnant people, and families experiencing homelessness. Most of these programs also target Americans living below or near the federal poverty line.
Internationally, Canada had a universal basic income program in the 1970s. Countries with UBI or GBI pilots currently running include Brazil, China, Germany, India, Iran, and Ireland.
What’s next for UBI?
Basic income pilots continue to be launched around the world. And, in the US, cash payment programs are beginning to inspire policy: States like California and New Mexico have introduced basic income bills into their state legislatures, aiming to create and fund lasting programs for residents.
This November, Oregon will vote on a UBI ballot measure. If it passes, Oregon residents could receive an annual $1,600 tax rebate, no strings attached — paid for by a tax on major corporations.
Tech leaders like Sam Altman, the CEO of OpenAI, and Elon Musk have also suggested that federal universal basic income might become necessary as artificial intelligence disrupts the labor market.
Have you benefited from a basic income program? Are you open to sharing how you spent the money? If so, reach out to this reporter at [email protected].
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