Weekly SSRN Tax Article Review And Roundup: Elkins Reviews Fleischer, Hemel & Leff On A Universal Basic Income

This week, David Elkins (Netanya) reviews new works by Miranda Perry Fleischer (San Diego) & Daniel Hemel (Chicago), The Architecture of Basic Income, 86 U. Chi. L. Rev. ___ (2019) and Benjamin M. Leff (American), EITC for All: A Universal Basic Income Compromise Proposal, 25 Wash. & Lee J. Rts. & Soc. Just. __ (2019):

This week saw the posting of two articles discussing the concept of universal basic income (“UBI”). It is interesting to compare and contrast two proposals for what is likely to be a focus of academic and political attention in the near future.

At the most fundamental level, the two articles take different tacks by their choice of how conceptually to integrate UBI into the current tax framework. Fleischer and Hemel compare UBI to a negative income tax. They demonstrate it that the difference between them is merely one of framing: a UBI financed by a progressive income is functionally equivalent to a negative income tax. One significant difference is that the negative income tax – like the positive income tax – is calculated on the family level, whereas UBI is calculated on the individual level. Fleischer and Hemel argue that a cash grant to each citizen and lawful permanent resident, regardless of age, would better serve the goals of reducing poverty that would a payment to families.

In contrast, Leff’s springboard is the Earned-Income Tax Credit (EITC). The differences between UBI and EITC are that UBI has no work requirement, UBI is not means tested, UBI is paid on an individual basis, and UBI is a regular cash income throughout the year. To make EITC more UBI-like, Leff proposes reforming EITC so as to remove means testing, to compute it on an individual basis, and to spread the payments throughout the year. The one non-UBI-like attribute of EITC that Leff would retain – and it is a significant one – is the work requirement. While he iterates his own belief that a program without a work requirement would be superior, he nevertheless proposes retaining it both because the connection between work and income runs very deep in American culture and because of the possible incentive for low-income workers to stay home. Fleischer and Hemel also consider the possible disincentive effects of a no-work-requirement UBI and conclude that it is likely to be negligible.

Note here the correlation between the structure of the proposed UBI and the point of departure from the current income tax discourse. Using EITC as a point of departure may effectively place a burden of proof on any change thereto. The possibility that removing the work requirement will create a disincentive to work may be enough to preclude a finding that the burden has been met. On the other hand, viewing UBI as a type of negative income tax may give less initial credence to the work requirement.

Both articles point out that support for a UBI can be found across the political spectrum. Leff references libertarian Charles Murray, labor leader Andy Stern, former President Barack Obama, and Senator and presidential candidate Kamala Harris. Fleischer and Hemel show how UBI is consistent with welfarism, with resource egalitarianism, and with libertarianism. Furthermore, each article credits Milton Friedman as the intellectual parent of the negative income tax; however, in keeping their different perspectives regarding the nature of UBI, Fleischer and Hemel claim that Friedman’s proposal was “a predecessor to the UBI.” Leff asserts that the negative income tax “essentially became the EITC.

Interestingly, neither of the articles cites Rawls’ rejection of the notion that the voluntarily unemployed have a claim to public assistance. In Rawls’ works, “those who surf all day off Malibu must find a way to support themselves and would not be entitled to public funds.” While it might seem counterintuitive that the conservative Friedman would advocate and that the redistributionist Rawls would reject transfer payments to the voluntarily unemployed, their positions actually conform well to the former’s libertarianism and the latter’s statism.

Returning to the practical elements of the two articles, aside from their different positions on the work requirement, they are quite similar. Each proposes that UBI not be means tested, that it be computed on an individual instead of on a family basis, and that it be paid out over the course of the year. Fleischer and Hemel propose a specific dollar amount: $500 a month ($6,000 a year) per person. While Leff does not advocate any specific amount, he does argue that UBI should be large enough to have a substantial effect on the lives of the poor and indicates that something around $1,000 a month ($12,000 a year) would be appropriate. Fleischer and Hemel also consider a $1,000 a month UBI but ultimately reject it as unfeasible because implementing such a scheme would vault the United States to first place in the government spending-to-GDP ranking. It is noteworthy that according to their figures even their more modest $500 a month proposal would move the United States close to Nordic levels (from the current 38% to 45%, close to Norway’s 49% and Sweden’s 50%). An open question is whether such a move is politically feasible in the United States today or in the foreseeable future.

These two well-written and insightful articles are clearly not the final word to be said on the subject of UBI, but they are just as clearly a good starting point for understanding the fundamentals of an important discussion.

Here’s the rest of this week’s SSRN Tax Roundup:

• José Alves (Lisbon), A DSGE Model to Evaluate the Macroeconomic Impacts of Taxation (2018)
• Frederik Boulogne (VU Amsterdam), Reviewing the OECD's and the EU's Assessment of Singapore's Development and Expansion Incentive (2019)
• Xu Diheng (Singapore Management University), A Step Forward for Tax Dispute Resolution between China and ASEAN Countries under the Belt and Road Initiative (2019)
• Yue Dong (Singapore Management University), The Impact of Double Tax Treaties on Inward FDI in ASEAN Countries (2019)
• Edward G. Fox (Michigan) & Jacob Goldin (Stanford), Sharp Lines and Sliding Scales in Tax Law (2019)
• Lloyd Hitoshi Mayer (Notre Dame), The Promises and Perils of Using Big Data to Regulate Nonprofits, 94 Wash. L. Rev. __ (2019) (forthcoming)
• Lloyd Hitoshi Mayer (Notre Dame), When Soft Law Meets Hard Politics: Taming the Wild West of Nonprofit Political Involvement, 45 J. of Legislation __ (2019) (forthcoming)
• Andrew D. Mitchell (Melbourne), Tania Voon (Melbourne) & Jarrod Hepburn (Melbourne), Taxing Tech: Risks of an Australian Digital Services Tax under International Economic Law, __ Melbourne J. Int’l L. __ (2019) (forthcoming)
• Susan C. Morse (Texas), When Robots Make Legal Mistakes, __ Okla. L. Rev. __ (2019) (forthcoming)
• Stephen E. Shay (Harvard), Comment on Selected Aspects of Proposals in Public Consultation Documentation Addressing the Challenges of the Digitalization of the Economy (2019)