DC Council explores options for Universal Basic Income

Earlier this year, the Council of the District of Columbia’s Office of the Budget Director released the report Approaches and Strategies for Providing a Minimum Income in the District of Columbia exploring the feasibility of a minimum income program in the city. Such a program would try to ensure that every individual receives enough money to cover basic expenses (like housing and food) in the city.

What is Universal Basic Income (UBI)?

Universal basic income is slightly different from minimum income. The former provides everyone in society, regardless of wealth or income, a set amount of money each month. The latter seeks to ensure everyone in society earns at least a set minimum amount of money. These closely related policy ideas have slowly been gaining traction across the globe. Although the Finnish government recently ended a trial on universal basic income,[1] our neighbors to the north, Canada, are still administering a trial in Ontario.[2]

 

 Photo credit:  Glen Zazove  on  Visualhunt  /   CC BY-NC-SA

UBI easier to use than public benefits

With this report, the DC Council examines the city’s safety net policies and the potential effects of three different possible minimum income programs in the nation’s capital. Around 38,993 DC households make below the Federal Poverty Level (FPL)[3], and many struggle to receive all of the benefits for which they are eligible due to issues such as onerous paperwork, lack of awareness, and burdensome requirements. Furthermore, it is no secret that it is incredibly expensive to live in the District of Columbia, from ever-rising rents to costly early childhood education. A minimum income would likely better administer benefits by making the benefits process simpler for both administrators and recipients, and seek to better ensure a basic standard of living in the District.

 

Options: 100% to 450% of FPL

The council’s report centers on four economic simulations: a negative income tax to provide households with income equal to 100% of the Federal Policy Level (FPL), cash benefits equal to 100% of the FPL, and two models equal to 450% of the FPL. In every model, the District’s GDP and employment would be negatively affected, though the degree of this impact differs for each. Unsurprisingly, the two more moderate models, which would provide up to 100% of the FPL either via a negative income tax or a cash benefit, have the smallest maleffect on the District’s economic growth. The two simulations that emphasize a 450% of the FPL cash benefit, on the other hand, are both projected to cost billions, decrease the size of the workforce, and diminish federal grants and Medicaid that the District currently receives but would be ineligible for under such a system. Though less ambitious, the 100% of the FPL negative income tax or the 100% of the FPL cash benefit programs may be more feasible for the District to enact considering its smaller effect on the local economy.

Conclusion

Overall, a basic income program becomes a question of trade-offs. Regardless of the level (100% or 450% of the FPL), the District’s economy and budget will likely be negatively impacted. Higher income residents may simply move to Northern Virginia or Maryland and commute into the city in order to avoid paying the increased taxes necessary to fund such a program. Jobs may leave the District as well for less-taxed jurisdictions. That being said, low-income residents would undoubtedly benefit from more cash in their pockets for housing, food, and other necessities like school supplies and clothing. It’s worth monitoring how minimum income, as described in Approaches and Strategies for Providing a Minimum Income in the District of Columbia, and the broader basic income movement continue to develop over the next few months and years.

 

Notes

[1] Antti Jauhiainen and Joona-Hermanni Mäkinen, “Universal Basic Income Didn’t Fail in Finland. Finland Failed It,” The New York Times, May 2, 2018.

[2] Benjamin Kettish, “Canadian province trials basic income for thousands of residents,” Independent, November 29, 2017.

[3] The 2018 Federal Poverty Level for the 48 contiguous states is $4,320 annually for a child and $12,140 annually for an adult.


Andrew Debraggio, Master of Public Policy Candidate | 2020, McCourt School of Public Policy, Policy Innovation Lab, Georgetown University wrote this post.