Paul L. Caron
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Thursday, November 5, 2020

Leff: A Universal Basic Income Through The EITC

Benjamin M. Leff (American), EITC For All: A Universal Basic Income Compromise Proposal, 25 Wash. & Lee. J. C.R. & Soc. Just. 85 (2019) (reviewed by David Elkins (Netanya) here):

Universal Basic Income ("UBI") is a concept that has recently begun to enter the popular political consciousness in the United States. It is defined as "a regular cash income paid to all, on an individual basis, without means test or work requirement." It is invoked for a wide variety of political and social purposes, but is almost always presented as radically different from existing governmental welfare and transfer systems. Once a UBI is disaggregated into discrete policy components, it is possible to imagine to what degree existing programs share the benefits (and detriments) of a UBI to a greater or lesser degree, and reforms could be made to make existing programs more "UBI-like," if that would be beneficial.

This Article re-envisions a UBI as a series of reforms to one of the largest existing governmental transfer program in the US: the Earned Income Tax Credit (EITC).

The EITC is a work-conditional transfer program, and so any UBI-like reforms to the EITC will lack the defining characteristic of a UBI — that is it not work conditional. On the other hand, a number of reforms to the EITC would make the program more "UBI-like." These include: (i) that the EITC "phaseout" be removed so the program is no longer means-tested (no means testing); (ii) that the program benefit be applied on an individual basis, decreasing the importance of support of custodial children (individuality); (iii) that the administration of the program be reformed so workers can receive payments throughout the year (regularity). By starting with the EITC and proposing a series of reforms to make it more "UBI-like," one is able to accurately assess the differences between a UBI and at least one large governmental transfer program, diminishing the impression that a UBI is too "utopian" to actually become reality. One is further able to build on decades of tax policy research about the successes and failings of the EITC.

Of particular importance to both supporters and critics of the UBI is its lack of work requirement, and that is often its most philosophically controversial element. By exploring UBI-like reforms to the EITC (which is work conditional), this paper relaxes a defining aspect of the UBI — that it be free from work requirements. For some supporters, this makes any comparison between the program proposed and a UBI nonsensical. But the EITC is already more like a UBI than many work-conditional transfer programs, and reforms could make its work-conditionality even less problematic. Still, maintaining the EITC's structure as a work-conditional transfer program distinguishes it dramatically from a true UBI, and loses a number of the central benefits of a UBI. It is the premise of this paper that an exploration of a partial UBI of this nature — a compromise — is useful for future discussion of the issue, even if the proposed program is a distinct second best. It is not a coincidence that Senator Kamala Harris, a contender for the 2020 Democratic presidential nomination, has proposed a UBI-like program, the LIFT the Middle Class Act, which shares many of the features of the reforms proposed in this Article.

https://taxprof.typepad.com/taxprof_blog/2020/11/leff-a-universal-basic-income-through-the-eitc.html

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Comments

Good luck. Congress is incapable of doing simple. I challenge all of you policy wonks to work VITA for one season. You'll discover why the EITC specifically and the individual tax code generally is a massive hairball.

Posted by: Dale Spradling | Nov 5, 2020 8:05:07 AM

The EITC is a huge magnet for fraud; ask any IRS investigator. Gang members have found it is easier than drugs- and more lucrative. But it is popular with the entitlement crowd, so expect it to increase under a Biden administration.

Posted by: Smitty | Nov 7, 2020 7:36:57 AM