Existing federal funding solves in the short-term and long-term progressive tax increases guarantees sustainability

To date, most guaranteed income programs have been funded by private philanthropic dollars. As state-level stakeholders look at opportunities to scale these programs, private donations will not be sufficient to sustain larger programs.

In the short term, there are opportunities to utilize federal dollars from various COVID relief efforts, particularly funding from the American Rescue Plan Act (ARPA). ARPA provides $350 billion in funding to states, counties, metropolitan cities, municipal governments,72 with the first half of funding being received in May 2021, and the second half to arrive in 2022. Units of government receiving these funds have tremendous discretion to utilize the funds to:

Support public health expenditures;

Address negative economic impacts caused by the public health emergency;

Replace lost public sector revenue;

Provide premium pay for essential workers; and

Invest in water, sewer, and broadband infrastructure.

In its interim final rule guidance the Treasury Department states that:

a cash transfer program may focus on unemployed workers or low- and moderate-income families, which have faced disproportionate economic harms due to the pandemic. Cash transfers must be reasonably proportional to the negative economic impact they are intended to address. Cash transfers grossly in excess of the amount needed to address the negative economic impact identified by the recipient would not be considered to be a response to the COVID-19 public health emergency or its negative impacts.73

In its final rule, effective April 1, 2022, Treasury maintains the interim final rule guidance and clarifies that it may be presumed that “low- and moderate-income households (as defined in the final rule), as well as households that experienced unemployment, food insecurity, or housing insecurity, experienced a negative economic impact due to the pandemic.”74

While this guidance is somewhat limiting, it does provide an opening for states to fund cash transfers to residents most impacted by the pandemic, and could be supplemented with other state dollars to encompass a broader population. States should think about how best to maximize these dollars so that they get to people most in need.75 For more information on potential sources of public funds, consult this Economic Security Project Fact Sheet.

In the long term, in order for a state program to be permanent it must be funded by tax dollars, and those who have more should pay more. Guaranteed income envisions not only a program that provides a basic standard of living for people struggling most, but a program that is redistributive – funded by taxation of people and entities who have the most income and wealth (and the least need) – and distributed to people with the least income and wealth and most need, thus shrinking inequality through equitable revenue raising and redistribution. In order to fund a guaranteed income for its no-income, low-income and middle-income residents, states should examine the full breadth of their revenue raising powers and increase tax burdens on the richest individuals and corporations, and could consider taxing wealth, income, or both. The federal government utilizes a graduated tax rate where income within higher brackets is taxed at a greater percentage than income in lower brackets – generally equating toward those with higher income paying more money in taxes. However, some states have regressive flat income taxes, or no income tax at all, and could consider funding a guaranteed income through implementation of a graduated tax system to more equitably tax the income of high earners in the state.76 For other states, instituting a state wealth tax – perhaps through the form of an estate or inheritance tax – could be a viable strategy for public funding.77

Wage earners or not, every person deserves to be able to meet their basic needs, and through these programs states can make a profound statement of compassion for their lowest-income individuals regardless of employment status and ensure that those who are working finally begin to reap greater rewards from the massive wealth they are creating.