A UBI would remove millions from poverty – empirically proven by Alaska and the child tax credit

When the child tax credit, first established in 1997, was expanded for a year in 2021, it was a major political and social win for the country. At a time when the pandemic had worsened many families’ financial distress, the Biden administration’s decision not only added to the amount of the tax credit and converted the payment from a year-end lump sum to monthly payments; it also abandoned the work requirement for parents. This immediately affected one third of all children in the U.S., including 52 percent of Black children and 41 percent of Hispanic children, whose families were formerly excluded because the parents earned too little to qualify for the tax credit. The tax credit expansion lifted 3.7 million children out of poverty by December 2021 without significantly reducing parents’ work participation. Then in January 2022, the expanded tax credit expired, which plunged 3.7 million back into poverty, with higher percentage increases in poverty among Hispanic and Black children. The credit showed us that cash assistance could help families stay afloat and, contrary to some political beliefs, parents would not leave the labor system because of it. Even so, the failure to renew the expansion should not negate this important political milestone: Congress came within one vote of abandoning parental work requirements as a condition to get cash assistance for their families. The child tax credit expansion is one step toward a universal basic income that could eliminate poverty without increasing unemployment. There are 37.9 million people in poverty in the U.S., according to 2021 Census Bureau figures. Providing a government-funded monthly payment to every individual would broadly lift them out of poverty, while providing millions of children a better chance at a good education, improved health and higher future earnings. With 11.6 percent of people in the U.S. living at or under the poverty line, this payment would benefit millions and save hundreds of billions of dollars by reducing the social costs of poverty. The question becomes: Can we convince our elected officials that poverty is not a moral failing, but a social condition that can be addressed by establishing an income floor below which no one falls? A universal basic income, or UBI, is defined as “a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement,” according to the Basic Income Earth Network. The child tax credit isn’t quite the same, because it is only for families with children; it also phases out at higher income levels and essentially still forces people to prove they are “poor enough” to need help—a means test. A more ambitious bill approaching the idea of UBI introduced by Representatives Rashida Tlaib and Mondaire Jones, would eliminate the means test, thereby creating a universal child allowance. Universal benefits have several advantages over means-tested benefits. They avoid divisions between “us” and “them,” removing the stigma associated with targeted benefits. Uptake by the needy, a persistent problem with targeted benefits, is improved when stigma and bureaucratic hurdles are removed. Universal benefits tend to be more popular and hence are more politically secure and better funded. And universal benefits, dispensing with means testing, are easier to administer. The universal child allowance would enroll all children at birth so no child would be excluded. No country has yet introduced a universal basic income sufficient for essential needs. But in the U.S., Alaska has enacted its Permanent Fund Dividend, which is an annual cash payment, averaging around $1,600, that goes to every resident without means test or work requirement. It contributes to poverty reduction and has no negative effect on people’s willingness to work.