Basic Income/Negative Income Tax

One State Already Has a Basic Income Plan

The forgotten politics of the Alaska Permanent Fund


I hope appearing on the cover of Time doesn't affect my Newsweek column.

I made a brief reference yesterday to the idea of a negative income tax or universal basic income: a single, unconditional cash payment aimed at keeping people out of poverty. There's been an increased interest in this idea recently—a new book here, a piece in the Post there—and a bunch of different variations on the concept have been put on the table. One way to sort those ideas is to separate the proposals in which the payments would supplant the existing welfare state from the ones that would just add one more program to the mix. (That's why Milton Friedman ended up opposing Richard Nixon's Family Assistance Plan, even though it had been inspired by Friedman's negative-income-tax proposal: Nixon's version would have been an add-on to the existing welfare state rather than a replacement for it.) Another notable distinction is between the people who would means-test the program and the ones who would just send a check to everyone. (That second division isn't a right/left split, by the way—Friedman was a means-tester, while Charles Murray is in the checks-for-all camp.)

Some of these ideas would be an improvement over the current system and some would not. But I don't want to get into the weeds of weighing the competing proposals right now. I just want to note a fact that's oddly missing from a lot of these discussions: One state of the union has something similar to a basic income program already.

Oh, right. You guys are already doing this.

When Alaska started raking in money from the Prudhoe Bay oil boom of the '70s, officials there decided to invest the money rather than blow it all at once. In 1982, after a rather fierce debate, the resulting Alaska Permanent Fund started sending annual dividend checks to the state's residents. Meanwhile, Native Americans in Alaska are organized into regional and village corporations, and those companies pay out dividends as well. (The latter checks are usually smaller than the payments from the statewide fund.)

That seems relevant to the policy discussion about income grants, doesn't it? Yet while the full-time campaigners for a guaranteed income are well aware of Alaska's system, the people who write about the idea elsewhere tend to ignore it. The liberal site Remapping Debate, to give an especially egregious example, did a big story on the push for a basic income in the '60s and '70s that concluded that those old proposals faded because "market devotees drowned out those who continued to believe that government has a vital role to play….By Ronald Reagan's election in 1980, the country in which [a basic income] had seemed mainstream a decade earlier looked considerably different." All of which is hard to square with the fact that such a program was adopted during the Reagan years, in a state with a Republican governor, as part of a political moment that saw the same state eliminate its personal income tax, and with an important assist from the Libertarian Party, which was a substantial political force in Alaska at the time. (There were Libertarian legislators in Juneau in those days, and the party was capable of drawing 15 percent of the vote in a gubernatorial election. The party supported the dividends on the grounds that sending the money to individual citizens was preferable to letting elected officials spend it.)

Three decades later, several states have established sovereign wealth funds like Alaska's, and with the fracking boom their number may soon grow. As of yet, no state has followed Alaska in distributing dividends to its citizens. But you shouldn't be surprised if you see a strong push in some of those jurisdictions for a system like the one adopted in Juneau. And if that happens, you shouldn't be surprised if the conversation about income grants in Washington continues to treat the idea as an esoteric intellectual exercise or a policy debate from the past, not a live political fight in the states.

Insert joke about libertarian populism here.

Bonus links: Versions of the idea have been around for a long time. Read a forgotten piece of relevant Canadian history here, and enjoy the Tuscaloosa News' take on a couple of socialists' basic-income proposal here. (In 1944 Alabama, apparently, a newspaper would explain H.G. Wells and George Bernard Shaw to its readers by comparing them to Huey Long.)

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  1. I like the idea of a negative income tax precisely because of its no-strings attached cash payment model. It would totally make the progressives and left-wingers show their true colors when they oppose it on the essential principle that poor people can’t be trusted to spend the money wisely.

    1. Poor people? They don’t trust wealthy or middle class people to spend money wisely either.

      1. You don’t know how to properly spend money unless you’ve attended the Kennedy School of Government.

    2. See, it has to start at the top, and trickle down to the poor.

      I keep waiting for the Democrats to convert all federal spending into massive, direct payments to poor people. I’m not holding my breath.

      1. With Politicians it is more like trickle down ON the poor

    3. It would totally make the progressives and left-wingers show their true colors when they oppose it on the essential principle that poor people can’t be trusted to spend the money wisely.

      Haven’t they been showing their true colors on this since… forever ago?

    4. Isn’t that the conservative and right-libertarian reason for opposing welfare? That you’re moral busybodies obsessed with what poor people do with their lives?

      I like the idea in theory. But it’s contrary to everything libertarians profess to care about–making sure poor people are completely aware that they’re losers and deserve to die cold and hungry, and making sure wealthy people know how special they are.

      1. Isn’t that the conservative and right-libertarian reason for opposing welfare? That you’re moral busybodies obsessed with what poor people do with their lives?

        Uhhhh no.
        You are fucking retarded and lack reading comprehension, as always.

  2. The Swiss are collecting signatures for a referendum on minimum income. (Google Translate)

    1. “the entire population a dignified existence and participation in public life allows.”

      “Before I got on the dole, I was ashamed to show my face.”

  3. That seems relevant to the policy discussion about income grants, doesn’t it?

    I’m not sure I see why. It’s not simply the payments that are relevant. It’s the reason behind the payments that’s relevant. The Negative Income Tax concept addresses setting up a more efficient social welfare state. Sovereign Wealth Funds are about redistribution of income generated by shared ownership of natural resources. The only tenuous relationship between the two is the simple act of the government cutting a check.

    1. But for looking at the effects of the payments, it’s just the payments that are relevant.

      1. Why? It’s pretty obvious what the affects of writing a check are.

  4. This is just minimum wage writ large.

    1. Iff means-tested.

      1. And if it’s a wage, paid by an employer. Which it isn’t.

  5. Well, as a part-time tax return preparer, I expect to see people like H&R Block and Jackson Hewitt fight it tooth and toenail, if it eliminates the earned income credit. Most storefront firms derive the bulk of their income from preparing returns for people with incomes below $35K and refunds above $5K. There’s no thrill like hearing someone who had NOTHING withheld from their check refer to a $10K check from Uncle Sugar as a REFUND.

    1. Of course, if it doesn’t eliminate the EIC, it would just be another HUGE nail in our national coffin.

    2. They only call it a “refund” because they can’t spell “transfer payment.”

    3. Does that shit actually happen?

      1. Technically no since payroll taxes were withheld and they may have even had some nominal amount withheld for FICA, but people having an actual negative tax liability that is a significant percentage of their income is easy.

        Hell because of some unreimbursed medical expenses and the mortgage interest deduction I had a couple of years where I was making almost $90k and actually had a slightly negative tax liability (had like $7.5k withheld and got back ~$8200)

        1. I’ve come out some years with a net gain from both federal and NY credits.

      2. I don’t know how often it happens in those amounts, but I’m sure people who’ve filed their own tax returns for many years and had withholding and were used to getting refunds will still consider it a refund in years where the amount of the refund exceeds what was withheld, or even if nothing was withheld that tax year. They’re just bookkeeping entries. A check comes from the treasury at a certain time of year, that’s your “refund”.

        Over a lifetime I doubt there are many people whose total EICs would exceed their total of taxes. Therefore on a net basis, they really are getting a refund, even if it’s not for the current year.

        1. BULLLL SHITTTT!!! Every stinking year I see dozens of young women who have never been married and have 3 or more kids by about the same number of men who will be collecting EIC for 20 or 25 years and then start screaming when they stop getting the big checks. They are very unlikely to EVER pay any significant income tax, since the income tax rate is so low at their income level.
          By the way, I purposely ignored social security and medicare taxes. People on the lower end of the scale will get far more back in benefits than they paid in to the system. Those on the other end will never get even a good fraction of what they paid in back, so I don’t consider it a tax as much as a deferred welfare arrangement.

          1. I believe most people have no idea how much money we are talking about here. A married couple with 3 children making in the low twenties will get in the neighborhood of $8,000 to $9,000 between the additional child tax credit and the EIC. This is based on ordinary, earned income. Food stamps, rent subsidies, AFDC, medicaid and any other government programs they may be receiving benefits from don’t affect either tax subsidy. Someone who knows how to work the system can effectively live on close to $40,000 a year while earning only half that. Of course, this is a nasty trap for them. When the kids start to age out of the subsidies, they see their effective income drop, but they have been lulled to complacency by years of government coddling, so they’re not ready for the transition.

  6. All good people have made some serious flubs. For Adam Smith it was the labor theory of value. For Milton Friedman it was the withholding tax (which made it into law) and this negative income tax (which thankfully didn’t).

    Even with means-testing, they could simply expand it, manipulate it however they like, or get rid of it altogether later on.

    1. I don’t think the negative income tax is a bad idea per se, in Friedman’s view it was merely a superior market approach to a welfare state and on that front he is correct.

      If you presuppose a welfare state a negative income tax is preferable to the crap we have today, arguments against the welfare state itself are a completely different subject.

      1. “Market approach.”

        Like cap and trade. And Obamacare.

        1. Yes, the first is market based, if you presuppose a rationing of carbon emissions then trading carbon emission credits is indeed market based. This says nothing about the validity of carbon rationing, merely that if it exists this is a market based approach to doing it.

          No on Obamacare, there is nothing even remotely market based about Obamacare. A market based approach to Health Care reform would be government funded health savings accounts where indivduals control how the money is spent, whether they buy insurance or just self insure with the account.

  7. GMI would be a great replacement for social security, food stamps, medicare, and a litany of other manipulative welfare programs. Which is exactly why it will never happen. There’s too much grease on the goose for federal and state bureaucrats to go along with a sweeping change like that.

    1. Government’s can’t set policy with a GMI. That’s why GMI will never, ever fly in this country.

      If I just give you cash money, where are the strings?

      1. AMEN to you both!!

  8. Just because something is preferable to something else doesn’t mean it’s a moral pursuit. Redistributionism should be eliminated root and stem, not ingrained with living wage policies. Proposals like this must be the most glaring intellectual inconsistencies within libertarian circles.

    1. Yes, sometimes we get snookered into believing that if we just give them a little gun control, they’ll go away.

      1. Yes, sometimes we get snookered into believing that if we just give them a little gun control, they’ll go away.

        That’s a perfect example of why you don’t give an inch and expect them to take anything less than a mile. I’d rather be characterized as an ideological puritan as long I’m being intellectually honest and consistent.

        you don’t get income for doing nothing.

        Sure you do. You just don’t usually gets wages or salary for doing nothing. Lest ye be a government worker.

        1. You ignore how frequently the tactic does work. One striking example comes to mind in the form of today’s Selective Service registr’n. How many even remember it’s still in force?

          In 1979 a bunch of proposals were introduced in Congress to reinstate a draft, or something even wider like universal service or a combined military-civilian mandatory corvee. Reinstating SS reg. was the compromise that eventually made it thru. At the time it looked like part of a slippery slope to a new draft, but that never happened, and today an institution of conscription is about the farthest thing from people’s minds. I wonder whether, however, if SS reg. hadn’t been reinstituted as a compromise, one of the other proposals would’ve instead, and might still be in force today. Sometimes you do have to give an inch to prevent losing a mile.

          1. Or think of any of various products that were proposed to be banned, but as a compromise were allowed to remain on the market with warning labels. In all the cases I can think of, those products are still on the legal market a long time later. There is such a thing as a pressure relief valve, and it usually works.

          2. You ignore how frequently the tactic does work[…] Sometimes you do have to give an inch to prevent losing a mile.

            So you think the “give an inch” approach more often leads to genuine compromise as opposed to the slippery slope outcome?

            If that were true, our federal government would exist within it’s Constitutional constraints and we wouldn’t have fiat currency administered by an unaccountable banking cartel, just to name one shining example.

            1. Ron Burgundy agrees with me


            2. Sometimes it’s one way, sometimes the other. That’s why there’s politics, and political consultants, and pundits, and even political futures markets.

              I do think that the pressure to not stay within Constitutional constraints had to be let out some way. Whether the compromises forestalled something that never would’ve happened anyway, or prevented violent revolution or non-violent instant abrogation of the Constitution, who can know? A piece of paper doesn’t act for itself, it’s not like it could’ve somehow resisted.

    2. I agree. A Guaranteed Minimum Income is a gross attempt to redefine the word “income” to mean “entitlement”.

      “income: a gain or recurrent benefit usually measured in money that derives from capital or labor; also : the amount of such gain received in a period of time”

      you don’t get income for doing nothing.

      1. “you don’t get income for doing nothing.”

        Unless you happen to be unionized employee of a local, state or the federal government.

        1. Or a hedge fund manager.

  9. Didn’t McGovern and Tom Paine promote similar things?

  10. Even if it’s politically impossible to implement NOW, it might be useful in the future if the U.S. collapses into self-governing regions and states. The more progressive states can use the negative income tax as an alternative to the welfare programs that destroyed the United States. Or something.

  11. I’d very much prefer to see the social safety net provided by voluntary donations and private charity. But that isn’t politically realistic in this day and age. And I’m not really sure if enough people would be generous enough to make it work in principle on a large scale, though I’d like to see it attempted. So given that, a negative income tax is vastly preferable to the current welfare state. But the devil is in the details. Means testing is one good example. Do you give it to everyone on the basis of equality before the law? Or do you means test it on the basis of reducing costs? Do you make it a voucher program to cover basic needs so that taxpayers don’t subsidize behavior they find objectionable? If so, how do you define basic needs and objectionable? Or do you cut a check and reject the social engineering aspect? Do you tie it to having some sort of job? If so, do you then carve out special exceptions for people who are temporarily unemployed? Or for people who can’t work due to injury, illness, or age? Or do you reject the concept of being unable to find work? Before long you can easily find yourself with something that basically amounts to the current welfare system, anyway.

    1. But if you do nothing, and private charity doesn’t step up to the plate, then you risk developing an angry underclass, that will probably garner lots of sympathy. And then they forcibly institute state welfare, anyway. It seems like you can’t avoid something distasteful.

      Or maybe not. Maybe without state welfare and other state distortions, poverty would diminish to the point where private charity could manage it. But I don’t know of any empirical evidence to support that. Maybe 18th/mid-19th century America? I admit my history in this area isn’t so great.

      1. History offers us few lessons here because the situation we find outselves in has never before existed in the history of our species.

        Prior to ~1900 we simply did not produce enough wealth to meet everyone’s basic needs, as our technological prowess grew we started to overcome that limitation but still lacked the infrastructure to distribute it to everyone.

        By 1970 that was no longer the case, today for the most part we really do live in a post scarcity society, not to the point where everyone can afford an iPhone, big screen tv, and SUV but certainly past the point to which we could easily supply everyone with food, shelter, water, and even air conditioning.

        1. In the past private charities were incapable of meeting all the charity needs primarily because there was simply not enough wealth to go around (either nationally or locally) but it also meant that the need for such charities was really unquestionable.

          Today one can easily argue that the actual need for charity is almost non existent because we are so wealthy just as easily as one could argue that providing charity is so cheap compared to our wealth that private charities could easily handle the job.

          Either way however on this issue the answers of history are useless to us.

        2. While its true that we could easily afford to keep anyone from falling below a subsistence level, more recent history shows us that the definition of “basic needs” will inevitably inflate ad infinitum until we just run out of either money or, dare I say it, empathy.

    2. Ideally you want a system that means-tests itself. You set the national minimum income by whatever arbitrary method and each dollar you make is taken out of your “share.”

      To pull numbers out of my ass, let’s say the minimum income is $25k, we have a flat tax is 30%, and I earned $16,523 in income: I get a check for $20,043 either at the end of the year or in payments every two weeks on a debit card. Once I reach $62,500 in wages I no longer receive a welfare check and become a net taxpayer.

      To make this a working system you would have to remove all existing entitlements and completely reform your economy to an entirely free-market structure. Layering this on top of our current mixed economy would be insanely inflationary, but I would gladly take this as a compromise if we could somehow get complete deregulation and welfare state dismantling.

      1. *Taken out of your share in proportion to the marginal tax rate.

      2. That would definitely be the simplest system. And it has the political benefit that a flat tax coupled with a check like you describe is in effect a progressive tax.

  12. I’d say there is a big difference between a state distributing income it earned from third party transactions (such as royalties on oil extraction or investment income) to all it’s citizens and a state simply issuing checks to people that are merely financed by taxes it collected from other people.

    The former isn’t welfare. The latter is indeed welfare – no different from current welfare programs except in he mechanics of it.

    1. I agree. Something like the Alaska Permanent Fund dividends work tolerably well as a method of dealing with a “resource curse.” In fact, I suspect that it might well be the least bad method, at least in practice.

      I’m much more skeptical about something like this being funded out of general taxes

  13. The FairTax has something like this, the intent of which being to convert a standard sales tax, which is mildly regressive, to a mildly progressive tax. The amount is the amount of tax paid on $500 worth of purchases, per month, which works out to slightly less than $1400 a year. Not a lot of money, but $115 a month to some guy currently living under a bridge is enough to get him a bank account and a decent meal every day.

  14. Only if it replaces ALL government spending.

    I’d be so in favor of this as a compromise to the communists. Fine, every year there is only one bill to pass. How much to tax, and how much money to evenly distribute amongst those in the bottom quintile. While in principle a terrible plan, it’s such a vast improvement on what we have now.

  15. Oh dear readers of Reaction Magazine, lets debate what would be a more fair tax WHILE THE FED PRINTS MONEY OUT OF THIN AIR.

  16. Jesse, the program is explained here–do some research!


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