Can State and Local Basic Income Policies Support Planning for Equity?

Can state and local basic income policies support planning for equity?

Daniel L. Powers B.S., Industrial and Labor Relations Cornell University, 2014

Submitted to the Department of Urban Studies and Planning in Partial Fulfillment of the Requirements for the Degree of

Master in City Planning

at the

Massachusetts Institute of Technology

The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of the thesis document in whole or in part in any medium now known or hereafter created

Signature of Author: Department of Urban Studies and Planning May 19, 2020

Certified by: Karilyn Crockett Lecturer of Public Policy and Urban Planning Thesis Supervisor

Certified by: Ceasar McDowell Professor of the Practice Chair, MCP Committee Department of Urban Studies and Planning

Can state and local basic income policies support planning for equity?

Dan Powers

Submitted to the Department of Urban Studies and Planning on May 19, 2020 in Partial Fulfillment of the Requirements for the Degree of Master in City Planning

Abstract: Interest in basic income has been rising as more and more cities and places undertake basic income pilots, seams in existing supports become more and more apparent, and racial and class-based disparities widen. Yet the justifications offered for basic income programs are diffuse and sometimes in tension. Questions remain about the purpose of pilots, and whether pilots will ever make the jump to permanent policies.

This thesis sets out to answer whether basic income policies at the city or state level can support equity. In doing so, it reviews the existing literature; examines failed basic income programs; investigates existing federal benefits systems and policies, and how they could constrain a basic income; and compares a city-level basic income pilot (Stockton’s Economic Empowerment Demonstration) with a state-level basic income program (Alaska’s Permanent Fund Dividend). Assessing this evidence demonstrates the breadth of decisions involved in designing basic-income policies, and the tradeoffs involved in each. Ultimately, basic income policies can support equity by providing a direct, flexible benefit to the poor and avoiding administrative burdens built into many benefit programs. However, whether a policy actually supports equity goals depends on the specific decisions involved in its design, including its financing, eligibility criteria, and whether other services are sacrificed to implement it. Serious questions remain unanswered by existing pilots about how a permanent policy would be financed and implemented. Uncritical calls for a basic income risk neglecting details that determine whether policies will support or undermine equity. City and state governments could still benefit from incorporating features of basic income into their equitable development strategies, and pilots and advocates could work more to answer unknowns about the transition to policies.

Karilyn Crockett Lecturer, Department of Urban Studies and Planning Thesis Supervisor

Jeff Levine Lecturer of Economic Development and Planning Thesis Reader

Acknowledgments

I am immeasurably grateful to Karilyn and Jeff, for their support and (especially) patience throughout this process. Karilyn in particular deserves credit for most of the things I’ve done of any value in graduate school since my first semester in her Housing, Community, and Economic Development class, and I will forever be indebted to her for her assurance and advice throughout my time at MIT.

I am also so appreciative of the chance to meet my classmates in DUSP. I am running out of time as I write this so I will be brief, but you all have been the best part of my time in graduate school and I am deeply saddened that our physical time together was cut short by the Coronavirus.

Thank you to my parents and brother, for your love and support.

Thank you to my friends, for existing and making my life better.

Thank you to the basic income researchers and practitioners who took the time to meet with me and share information. I am especially grateful to the Stockton Economic Empowerment Demonstration, for sharing access to participant interviews.

Table of Contents

Abstract...... 3 Acknowledgments ...... 5 Table of Contents ...... 7 Chapter 1: Introduction ...... 9 Introduction ...... 9 Methodology ...... 12 Theoretical Grounding...... 13 Chapter 2: History of and Existing Research on Basic Income ...... 18 Definition and History of Basic Income ...... 18 Literature Review on Basic Income ...... 24 Examining Basic Income Failures ...... 34 Federal Social Services and Transfer Programs ...... 44 Chapter 3: Examining Basic income in Stockton and Alaska ...... 64 Overview ...... 64 Context-setting ...... 65 Basic Income in Stockton and Alaska ...... 75 Chapter 4: Evaluating and Designing Basic Income Policies ...... 94 Overview ...... 94 Policy Choices and Tradeoffs...... 95 Benefit Simulation in Stockton ...... 104 Conclusion and Design Considerations ...... 105 Chapter 5: Conclusions ...... 109 Bibliography ...... 114

Chapter 1: Introduction

Introduction The US has a deeply problematic relationship with social assistance. Welfare has only been set aside for the “worthy” poor, defined in racist and regressive ways that direct aid away from the most needy, stigmatize recipients, and set up numerous administrative hurdles to claiming aid. Out of a patronizing concern that people who receive aid will use it in “unproductive” or non-socially sanctioned ways, aid is traditionally burdened with numerous conditions—such as work requirements—to control the type of beneficiary, the way that they use their benefits, and limit participation. Cities and states have a deeply problematic relationship with equity and inclusion. The tools available to each to ensure that the most-needy benefit from development are often compromised or vulnerable to compromise. Cities often view their responsibilities to their residents as magnets for private investment from which benefits will flow, rather than providers of essential services and structures that shape people’s lives. Community benefits agreements have been used to try to ensure that residents benefit from development, yet often require public giveaways as tradeoffs for private concessions and can give a façade of public approval to projects opposed to community interests.1 Cities and states often give tax incentives to projects purporting to provide public benefit without accountability mechanisms to ensure that they meet their promises.2 In March 2020, the advent of COVID-19 across the US made both failures apparent. The US social safety net is not equipped to help masses of people unable to work in conditions of social distancing, and who rely on discontinued public services to provide and offset expenses of childcare. Cities and states have strained to maintain existing systems while bleeding money from the pandemic’s economic hit.3 While COVID-19 has expanded the number of people victimized by the failings of our social safety net, those who will suffer most deeply are the same communities of color who status quo economic policies and processes have always failed. In the midst of the COVID-19 pandemic, republican and democratic politicians have considered at least a short-term, national-level universal basic income to both counteract the economic pain wrought by the pandemic and facilitate social distancing, and have passed

1 Wolf-Powers, “Community Benefits Agreements and Local Government,” 4, 14-15. 2 Florida, “Rethinking Tax Incentives So They Actually Work.” 3 Stewart, “States and Cities Are ‘Falling off a Cliff’ as the Economic Crisis Sets In.”

9 legislation giving all Americans a one-time economic impact payment in the meantime.4 During the 2020 democratic primary, candidate Andrew Yang proposed replacing existing social services programs with a national-level universal basic income to address the effects of automation, but the US has never had a national-level basic income, and only limited experiences with basic income at other scales of government.5 Since 1982 the state of Alaska has had a near-universal basic income in the form an oil and gas dividend, which distributes a portion of yearly oil and gas revenues in the state to most residents.6 Several indigenous tribes provide each of their members a portion of yearly casino profits, ranging from $900 to $35,000 annually.7 Before the pandemic, a number of US cities undertook or considered pilots providing periodic cash transfers to a select group of (often low-income) residents, motivated by goals of economic equity and inclusion. City pilots have attracted substantial media attention, but none have been scaled up to a permanent program, leaving what they might look like in practice— and their ultimate purpose—an open question. In this thesis, I seek to answer whether basic income policies at the city and state-level could help advance goals of equity and inclusion or whether basic income policies threaten to siphon funding away from more effective programs in a context of tight state and local budgets, using Stockton’s basic income pilot and Alaska’s Permanent Fund Dividend as case studies. My thesis sets out to answer the following research questions:

1) How do basic income policies fit within existing national, state, and local-level policy frameworks for equity and inclusion? 2) What do existing research, failed basic-income policies, and Stockton/Alaska’s experience tell us about the benefits and tradeoffs of basic income policies compared to other equitable development policies? 3) How could a basic income policy could be structured to best achieve goals of equity and inclusion?

Chapter 1 introduces the thesis topic, describes the thesis methodology, and presents the theoretical frameworks the thesis uses to assess basic income. Chapter 2 covers background information on basic income and contextualizes it, including defining basic income

4 “Economic Impact Payment Information Center | Internal Revenue Service”; Klein, “This Feels Much Worse than 2008”; Matthews, “Mitt Romney’s Coronavirus Economic Plan”; Matthews, “Dear Congress.” 5 “The Freedom Dividend, Defined - Yang2020 - Andrew Yang for President.” 6 “Permanent Fund Dividend | Alaska Oil and Gas Association.” In practice, the amount of the benefit has been capped below it’s proportioned amount for a number of years. Additionally, the benefit does not go to all residents. 7 Bidadanure et al., “Basic Income in Cities,” 9; Lapowsky, “Free Money”; Marinescu, “No Strings Attached,” 15.

10 and going through a brief history of the policy; reviewing what existing literature has to say on the benefits and tradeoffs of basic income policies, examining failed basic income programs for explanations on how they failed, and what lessons that offers for future policies; and examining the existing system of federal benefits and transfers—including a deeper dive on three policies—to assess how that system would constrain a basic income program. Chapter 3 delves into Stockton and Alaska’s basic income policies, including the economic and policy context of each place, the goals of each basic income program, and the benefits/costs of each program. Chapter 4 examines more closely the decisions involved in designing a state and local basic income and the tradeoffs associated with each, runs through a rough simulation of the costs of a permanent basic income program in Stockton, and identifies relevant considerations policymakers should account for in designing a basic income program. This thesis ultimately finds that evidence on the benefits of a basic income are well- established, and demonstrated in both the Alaska and Stockton pilots. However, a number of challenging decisions go into the design of a basic income and significant obstacles exist to establishing more permanent basic income policies, especially around program financing. How these decisions and tradeoffs play out in specific places will determine whether future basic income programs serve goals of equity and inclusion, or tradeoff from other priorities. Regardless of basic income’s future, thinking about how existing systems of social service and equity policies can move closer to a basic income could help capture some of the benefits of a basic income, and reduce the burden the most-needy face in navigating complex, stigmatizing social service programs. This thesis can help inform: 1) Current and future debates about the benefits of basic income policies compared to other policies: Local governments must make decisions about how to allocate scarce financial resources. This thesis can help local governments and practitioners understand whether pursuing a basic income policy makes sense to achieve equity goals and how they could design those policies, or whether they should pursue alternative measures. 2) Features of basic income policies that could be adopted for other policies: Even if basic income policies are unfeasible at the city level, elements of basic income policies could be beneficial for other policies (e.g., reducing administrative burdens). This thesis can help identify which and how. 3) The scale at which to sponsor basic income policies; and how cities can imagine their roles in achieving equitable development: Basic income policies have been proposed and sponsored at national, state, city, and other (e.g., tribal) scales. By evaluating their

potential at the city level, this thesis can help in assessing at which scale basic income policies are most appropriate. It can also inform debates about how cities should imagine their role in advancing equitable economic development, and the purpose of ongoing and proposed basic income pilots.

Methodology To examine the potential of basic income as an equity policy, I used as case studies Stockton’s basic income pilot—the Stockton Economic Empowerment Demonstration (SEED)— and Alaska’s basic income policy, the Alaska Permanent Fund Dividend. Stockton and Alaska offer a number of useful points of comparison. Beyond a contrast of a state and local government, each program has different purposes and motivations. While Stockton’s is explicitly intended to address poverty and inequality in the city, Alaska’s was created to build public support for risk-averse management of oil and gas revenue. Alaska payments go to almost all Alaska residents, whereas Stockton’s pilot is targeted at low-income neighborhoods. Alaska’s program is permanent, whereas Stockton’s is a pilot. A private organization finances Stockton’s pilot, while Alaska’s program is financed by oil and gas revenue. Stockton provides $500 a month, while Alaska pays out varying amounts annually (based on oil and gas revenue in a given year; payments averaged $1,157.34 per person since 1982).8 Other reasons also inform the choice of Stockton and Alaska. Practically, information about both is available and comprehensive. Stockton has been transparent about the design of the program and data on midpoint outcomes, and has been covered widely. Alaska’s program has existed since 1982 and has been researched extensively. Recent controversy over Alaska’s program also illustrates the important political difficulties involved in pursuing a basic income policy. To answer my research questions, I used several methods: 1) Policy and legislative analysis: I examined the design of Stockton’s basic income pilot and Alaska’s basic income program, reviewing foundational documents, state information, legislation, and regulations. I also examined the existing set of equitable development policies to understand how a basic income policy would fit in, and for comparison of the potential benefits and tradeoffs of a basic income policy to existing programs. This included a review of federal-level social services, to understand how a city-level basic income program would fit in or conflict with other sets of benefits.

8 “Summary of Dividend Applications & Payments.”

2) Budget analysis: I examined budget information on Stockton and Alaska to understand their overall financial situation and current support for equitable economic development policies. This analysis also informed my discussion of how cities and states could finance a basic income policy (whether through new financing mechanisms or using existing sources of revenue). 3) Literature review: I reviewed literature on the expected benefits and tradeoffs of basic income policies, as well as literature on the benefits and costs of Alaska’s basic income policy.9 4) News coverage: I examined news coverage on the effects of basic income policies, political developments around the basic income policies, on failed basic income policies, and for context on the basic income policies. 5) Interviews: I interviewed five basic income researchers and practitioners, as well as one of the administrators of the Stockton pilot. The administrators of Stockton’s program shared access to a collection of 14 interviews with participants in the pilot; I coded these interviews based on common themes, and report their results. 6) Data: I report data from the midpoint of the Stockton basic income pilot, and on Alaska’s basic income program. I also used Census data to project the cost of a basic income policy in Stockton and for context on Stockton’s program.

Theoretical Grounding

Evaluation Standard My thesis sets out to answer whether basic income policies could help states and cities advance equity. I use the following standard to evaluate basic income policies’ equity potential: a basic income policy would advance equity if it predominantly serves the interests of low- income and racially marginalized persons in cities. This can include redistributing resources to these groups; helping them better meet their needs; increasing their power in government decision-making; reducing barriers they face (including barriers accessing public assistance); acknowledging and trying to redress historical injustices; and transforming the relationship between government and these groups. A basic income policy could fail to advance equity if, for instance, it siphoned funding away from more effective equity programs; most benefits flowed to higher-income or white people; low-income and racially marginalized people are unable to

9 Stockton’s policy is ongoing, so there has not been time enough yet for research to be published about it.

access the income; or it was rolled back before all benefits were distributed. In evaluating whether basic income policies could meet this standard, this thesis draws from three theoretical frameworks: equity planning and the just city, administrative burdens, and the role of the state/city. The table below provides a brief summary; I delve into each in more detail in the section that follows. Table 1: Theoretical Frameworks for Assessing Basic Income Framework Description Evaluation Questions

Public policies should prioritize racial and economic justice To what extent do basic income Equity planning over other considerations policies advance or prioritize racial and the just and economic justice? city Requirements in government social service programs impose To what extent do basic income Administrative learning, compliance, and psychological costs on potential policies impose or reduce burdens participants, which 1) can reduce program effectiveness and administrative burdens, especially participation, and 2) affect the most-vulnerable most deeply on the most-vulnerable?

Cities and states often conceive of their role as to attract To what extent do basic income Role of the private investment, without thinking of more direct policies represent a new approach state/city responsibilities or obligations to existing residents who have for city/state economic historically suffered under traditional development processes; development, or to who is worthy and government social service programs typically condition of state social services? assistance on work, without consideration of people’s inherent worth or whether work is the best use of their time

1) Equity Planning and the Just City I will evaluate the extent to which basic income programs advance goals of racial and economic justice. In doing so, I draw from Jonathan Metzger’s framework for equity planning and Susan Fainstein’s concept of the just city.10 Metzger defines equity planning as: 11

“A framework in which advocacy planners use their research, analytical, and organizing skills to influence opinion, mobilize underrepresented constituencies, and advance and perhaps implement policies and programs that redistribute public and private resources to the poor and working class in cities.” Fainstein defines a just city as one:12

10 I expand the Just City’s application to states. 11 Metzger, “The Theory and Practice of Equity Planning: An Annotated Bibliography,” 113. 12 Fainstein, The Just City, 3.

"in which public investment and regulation would produce equitable outcomes rather than support those already well off…to ‘name’ justice as encompassing equity, democracy, and diversity and to argue that its influence should bear on all public decisions…there is not always a trade-off between justice and efficiency, but when there is, the demands of justice should prevail.” Fainstein develops these arguments further throughout her book, putting forth the maximization of equity, diversity, and democracy in policy as the goals of just policymaking, and setting out “to specify programs that would benefit relatively disadvantaged social groups”.13 She critiques cities for narrowly conceiving of their role as attracting private development in pursuit of economic growth without an ethical or moral grounding to their actions.14 Finally, Fainstein contextualizes our understanding of justice within the constraints of multiple layers of government, including the federal government.15 Therefore, while I discuss administrative efficiencies to some extent, my primary criteria in assessing basic income at the local and state level is its role in advancing racial and economic justice; redistributing resources to marginalized groups; and influencing opinion around de-stigmatization of benefits, and racial and class inequities. This will consider the design of basic income policies compared to other policies aimed at inclusive economic development (e.g., how basic income policies compare in terms of requirements placed on recipients, or assumptions about who is deserving of benefits), the discourse used to legitimate each, and the effects of basic income policies for low-income and racially marginalized groups. To make the constraints of existing benefit systems more visible and how a basic income policy oriented towards justice pushes up against them, I describe federal policies and their interaction with basic income policies.

2) Administrative Burdens Compared to other social service programs, a commonly discussed benefit of a basic income—and similar cash transfer programs—is their administrative efficiency. This benefit can manifest in multiple ways, including lower program costs and greater benefits per dollar spent, and fewer barriers for participants to receive benefits they’re eligible for. I will focus mainly on the latter, drawing from Pamela Herd and Donald Moynihan’s concept of administrative burdens to do so. Herd and Moynihan define administrative burdens as “the learning, psychological, and compliance costs that citizens experience in their interactions with government”.16 Program rules and requirements can serve legitimate purposes but tradeoff with program accessibility,

13 Fainstein, 166. 14 Fainstein, 1. 15 Fainstein, 7, 17-18. 16 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN, 22.”

15 and many social services programs come layered with levels of complexity that make it challenging for people to learn about and claim benefits they should be eligible for. This can reduce participation rates, program effectiveness, and diminish the self-worth of people who do participate.17 Specifically, Herd and Moynihan identify three types of administrative costs faced by people seeking social services:18 1) Learning costs, such as finding out about social services, their eligibility requirements, and going through the application process; 2) Compliance costs, such as meeting program rules and documentation requirements; and 3) Psychological costs, such as stress, loss of autonomy, and stigma from using programs. Administrative burdens are usually excluded from technocratic cost-benefit analyses that typify our understanding of administrative efficiency, even though they have important equity implications—"they affect some groups more than others, and in doing so, often reinforce inequalities in society”—and can disable access to essential rights and benefits like financial assistance for college, voting, or citizenship for the people who most need them.19 Burdens also compound for people who most need social supports:20

“Individuals applying for Medicaid are also likely to be applying for SNAP and possibly the EITC. These same individuals are also less likely to have IDs or live in neighborhoods that provide enough polling places, making it harder to access the right to vote. Poor women are disproportionately more likely to have unplanned pregnancies and also to need access to abortion services—which many states are making more difficult to access. If their children are to go on to postsecondary school, they can look forward to the overwhelming and frustrating financial aid process. In short, not only are policies targeted at the poor more burdensome, but the poor are also more likely to experience government as routinely burdensome.” [emphasis added] Herd and Moynihan’s framework elevates the constructed nature of administrative burdens, and differences in treatment between administrative burdens and regulatory costs on businesses. Burdens are reflective of policy choices, with embedded values; a state’s decision

17 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 23-29. 18 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 23-29. 19 Herd and Moynihan, “INTRODUCTION,” 2, 3; Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN," 17; Herd and Moynihan, “TOWARD AN EVIDENCE-BASED APPROACH TO ADMINISTRATIVE BURDEN," 242-243 In a particularly stark example of the stakes involved in administrative burdens, Herd and Moynihan describe the Treasury Department’s memo to Franklin Deleanor Roosevelt titled “Report to the Secretary on the Acquiescence of This Government in the Murder of the Jews,” condemning State Department officials for deliberately creating administrative burdens to limit the immigration of European Jews. Herd and Moynihan, “INTRODUCTION,” 8. 20 Herd and Moynihan, “INTRODUCTION,” 7; Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 27, 31.

16 to make it more difficult to access SNAP benefits (food stamps) reflects a set of ideas about who is likely to apply for food stamps, how state aid should be used, and a state’s obligation to its most in-need residents.21 Whereas discussions about regulatory impacts on businesses have become normalized in discussions of regulations—and regulatory costs on businesses are intuitively accepted as an unwelcome side effect of regulations that ought to be minimized— discussions of burdens’ impacts on potential beneficiaries are often not given the same privileged treatment by policymakers, and businesses lobby to maintain burdens so as to profit off of resolving them.22 In evaluating the administrative burdens associated with basic income versus other equity policies—and in assessing different choices of how to design a basic income policy—this paper foregrounds Herd and Moynihan’s assumption that “public officials should explicitly consider the [administrative burdens] that come for those who have the greatest difficulties in overcoming burdens.”23

3) Role of the State and City This thesis will evaluate the vision of the city and state governance put forward by basic income policies compared to existing economic development policies. Some academics have discussed the evolution in city governance towards “entrepreneurialism,” pursuing public-private partnerships and working to attract private investment.24 Many contemporary equitable development tools are designed to enlist the private sector into providing public benefits (e.g., community benefits agreements), to better fit workers/businesses into market dynamics (e.g., workforce training; minority and women-owned business procurement), or to attract private investment on the assumption that doing so will bring benefits to local workers. Contemporary benefits programs across scales of government condition benefits on work and income, and often prescribe how recipients can use benefits, reflecting deeply racialized and gendered notions of who is deserving of public assistance and who is not.25 This thesis will contemplate

21 Herd and Moynihan, “INTRODUCTION,” 8-12; Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 33-34 22 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 37. For example, the tax- preparation industry has lobbied extensively to prevent the Internal Revenue Service from automating or simplifying tax preparation. 23 Herd and Moynihan, “INTRODUCTION,” 13. 24 Harvey, “From Managerialism to Entrepreneurialism,” 3-5. 25 Burnham, “Racism in United States Welfare Policy,” 47, 48-49; Chunn and Gavigan, “Welfare Law, Welfare Fraud, and the Moral Regulation of the Never Deserving Poor,” 230-236

17 how the adoption of basic income policies could fit into or break away from these frameworks, and what paradigm of city governance a basic income policy could instantiate instead.

Chapter 2: History of and Existing Research on Basic Income Definition and History of Basic Income

Reviewing basic income’s definitions, ideological history, and pilots reveal several main takeaways: 1) Intellectual support for basic income has existed since the 16th century, although it has taken until the last 60 years for that support to manifest in pilots or policies. 2) Support for basic income has originated mostly—although not exclusively—from academic or government circles as opposed to the grass-roots, and its supporters represent eclectic ideological backgrounds. 3) A number of basic income pilots have and are being implemented, although almost no permanent basic income policies have been established. Basic income policies provide periodic payments to all or some residents of a place, unconditional on employment status and benefit-use.26 The National League of Cities and Stanford Basic Income Lab defines a universal basic income as:27

“a cash payment granted to all members of a community on a regular basis, regardless of employment status or income level. It is meant to be individual, unconditional, universal and frequent.” In their working paper examining basic income pilots in the US and developed nations, Hilary Hoynes and Jesse Rothstein identify three features of a universal basic income:28

“a) it provides a sufficiently generous cash benefit to live on, without other earnings; b) it does not phase out or phases out only slowly as earnings rise; and c) it is available to a large proportion of the population, rather than being targeted to a particular subset (e.g., to single mothers).” In discussing basic incomes for equity purposes, I depart from features a) and c) in Hoynes and Rothstein’s definition, examining universal and targeted forms of basic income, and levels of basic income sufficient to fully support recipients as well as supplement recipients’ other income. It is possible that a targeted basic income could better advance equity than a universal one, and that even a cash benefit inadequate to live on without other earnings could promote equity.

26 “Universal Basic Income: Who’s Piloting It?” 27 Bidadanure et al., “Basic Income in Cities,” 3. 28 Hoynes and Rothstein, “Universal Basic Income in the United States and Advanced Countries,” 1.

Although cities recently undertaking pilots have done so out of concerns for equity and inclusion, numerous ideological justifications have been offered for basic income policies throughout history.29 The concept of a minimum guaranteed income originated in the 16th century as a way to disincentivize theft, and to assist poor people who were willing to work.30 At the start of the 20th century, British philosopher Bertrand Russell advocated for a universal basic income sufficient to meet basic needs but scaling up for workers under an anarcho-socialist system, and Quakers Dennis and Mabel Milner advocated for a state-provided, universal basic income to efficiently eliminate poverty.31 American interest in basic income emerged in the 1960s, from different ideological sources. Economist Robert Theobold proposed a basic income to deal with impending job losses from automation, free-market capitalist Milton Friedman proposed a negative income tax to replace the existing social welfare state, and liberal economist James Tobin proposed a guaranteed minimum income to support the poor while incentivizing work (similar to today’s Earned Income Tax Credit).32 Legislation establishing a guaranteed income with supplements for workers—the Family Assistance Plan, proposed by President Nixon and discussed in more detail in the “Examining Basic Income Failures” section that follows—made it through the House before ultimately being killed in Committee by the Senate in 1972.33 Recently, universal basic income policies have been championed by prominent figures in Silicon Valley, including Mark Zuckerberg and Elon Musk; Y Combinator, a Silicon Valley start-up, provides financing for basic income pilots, and Andrew Yang (founder of Venture for America) made establishing a basic income a centerpiece of his presidential campaign.34 In parallel, equity advocates have forwarded basic income as a response to severe wealth inequality and racial injustice.35 Much of basic income’s support throughout history has come from elite circles, although not all. In organizing the Poor People’s Campaign before his assassination, Martin Luther King critiqued the piecemeal approach of the existing social welfare system as well as the stigmatization of people impoverished through discrimination and economic dislocation,

29 Hoynes and Rothstein, 1 3-5. 30 “History of Basic Income.” 31 “History of Basic Income.” 32 “History of Basic Income.” 33 Herd and Moynihan, “THE EARNED INCOME TAX CREDIT,” 198-200; “History of Basic Income”; Meyer and Holtz-Eakin, Making Work Pay, 22. 34 Clifford, “Alaska Gives Residents Free Cash Handouts—Here’s What Mark Zuckerberg Thinks Everyone Can Learn from It”; Ito, “The Paradox of Universal Basic Income.” 35 Holder, “An Early Peek at What Happens When a City Gives Its Residents Money.”

19 dismissing the idea that the normal operations of the market could eliminate poverty.36 He instead advocated for either full-employment or a guaranteed median income:37

“To guarantee an income at the floor would simply perpetuate welfare standards and freeze into the society poverty conditions…The contemporary tendency in our society is to base our distribution on scarcity, which has vanished, and to compress our abundance into the overfed mouths of the middle and upper classes until they gag with superfluity. If democracy is to have breadth of meaning, it is necessary to adjust this inequity. It is not only moral, but it is also intelligent. We are wasting and degrading human life by clinging to archaic thinking.

The curse of poverty has no justification in our age. It is socially as cruel and blind as the practice of cannibalism at the dawn of civilization, when men ate each other because they had not yet learned to take food from the soil or to consume the abundant animal life around them. The time has come for us to civilize ourselves by the total, direct and immediate abolition of poverty.” During the 1960s in the US, United Kingdom, and Italy, women welfare claimants organized and campaigned for basic income policies to compensate women for unpaid work, and decrease men’s power in the household from their access to wages.38 Additionally, in Denmark in the 1980s, basic income gained a following with food sector trade unions, made up by a high proportion of women and part-time workers.39 Basic income pilots have been implemented in a variety of places and for a variety of purposes, although few permanent examples exist. The Eastern Band of Cherokee Indians provide each of their members a portion of yearly casino profits.40 An early basic income program in the 1970s in Canada called “Mincome” provided a guaranteed income to more than 1,000 low-income families across Manitoba, and to all 12,400 residents in the town of Dauphin.41 In the 1960s and 1970s, the Nixon administration started income-maintenance pilots in Seattle and Denver, which paired cash with counseling and training.42 India’s Self Employed Women’s Association conducted basic income pilots in nine villages from 2011 and 2013 to fill- in for failures in government welfare programs.43 Finland ran a basic income pilot from January 2017 to December 2018 with the goal of increasing workforce participation,44 and Namibia ran a basic income pilot from 2008 to 2009 in a village near the capital to reduce poverty and inequality.45 The Mexican Government sponsored an experiment providing unconditional food

36 Weissmann, “Martin Luther King’s Economic Dream.” 37 Weissmann. 38 Miller, Yamamori, and Zelleke, “The Gender Effects of a Basic Income,” 138-145. 39 “History of Basic Income.” 40 Bidadanure et al., “Basic Income in Cities,” 9; Marinescu, “No Strings Attached,” 15. 41 Bidadanure et al., “Basic Income in Cities,” 8; Calnitsky and Latner, “Basic Income in a Small Town,” 375-376 42 Bidadanure et al., “Basic Income in Cities,” 9. 43 Davala, “Pilots, Evidence and Politics,” 373-374. 44 De Wispelaere, Halmetoja, and Pulkka, “The Finnish Basic Income Experiment.” 45 Carroll, “BIG PILOT PROJECT IN NAMIBIA HAS POSITIVE IMPACT (from 2008) | BIEN.”

assistance, an equivalent amount of cash, or no aid (as a control) to 200 villages in 2003.46 The nonprofit poverty-reduction GiveDirectly is currently operating a 20,000 person unconditional cash transfer study in Kenya.47 The National League of Cities and Stanford Basic income lab published a table categorizing basic-income-like programs and pilots in the US and Canada.48 The table illustrates both the surprising extent of basic income programs across the US, and variation in their features. Table 2: Basic Income Policies in North America (Reproduced from the National League of Cities and Stanford Basic Income Lab)49

Project Location Implementing Dates Recipients Amount organization and frequency

Universal basic income

Eastern Band of North Carolina Eastern Band of Cherokee Ongoing since All enrolled Approx. $3,500- Cherokee Indians 1996 members of Eastern 6,000 / 6 months Indians Casino Band of Cherokee

Revenue Fund Indians

Basic Income TBD in 2019 Y Combinator Research TBD (3-5 yrs) 1,000 residents of $1,000 / month Project low- to middle- income neighborhoods

Ontario Basic 3 sites in Ontario, Government of Ontario 2017 - March 4,000 low-income Up to $16,989 per

Income Pilot Canada 2019 (possible individuals and year for a single early couples (18-64 years person, less 50% of termination) old) any earned income

Up to $24,027 per year for a couple, less 50% of any earned income

46 Cunha and Giorgi, “The Price Effects of Cash Versus In-Kind Transfers,” 2. 47 “Basic Income Kenya Study.” 48 “Universal Basic Income: Who’s Piloting It?” 49 “Universal Basic Income: Who’s Piloting It?”. A base income is “intended to be a supplement, but not to ensure basic needs,” whereas a basic income is “approximately sufficient to meet basic needs,” and a cash transfer is a one-time payment. Universal programs go to everyone, and non-universal are targeted.

Up to $500/month additional for people with disabilities

Universal base income

Alaska Alaska Alaska Permanent Fund Ongoing since All Alaska residents Approx. $1,000- Permanent Fund Corporation (state- 1982 $2,000 / year

Dividend owned)

Stockton Stockton, CA Office of Mayor Michael Feb 2019 - Jul 100 residents of low- $500 / month Economic Tubbs, Reinvent South 2020 to middle-income Empowerment Stockton Coalition, neighborhoods Demonstration Reinvent Stockton

(SEED) Foundation

Chicago Resilient Chicago, IL Chicago Resilient Families TBD Proposed: 1000 Proposed: $500 / Families Initiative Task Force families month Initiative (proposed)

Basic income

Magnolia Jackson, MS Springboard To 2018 - 2019 16 low-income $1,000 / month

Mother’s Trust Opportunities African-American mothers

Preserving Our Santa Monica, CA City of Santa Monica Nov 2017 - 21 low-income Calculated by

Diversity Housing and Economic ongoing elderly, rent- household using the Development burdened renters. Basic Needs Subsidy Proposed expansion Method, average of to serve up to 300 $500 / month

Base Income

Baby’s First New York City, NY University of California, 2017 - 2022 1,000 low-income $333 / month for 40 Years (Income & New Orleans Irvine mothers with months for the Developing metropolitan area, Columbia University newborns treatment mothers;

Brain Study) LA New York University $20 / month for 40 Omaha University of Wisconsin- months for control- metropolitan area, Madison group mothers NE Twin Cities, MN

Direct Giving Lab Chicago, IL Direct Giving Lab Ongoing since 70 low-income $100 / month 2017 families. Proposed expansion to 200

Cash transfers

General Merced, CA Merced County Human Ongoing Low-income Calculated based on

Assistance Services Agency individuals ineligible individual need for CalWORKs and without children in the home

Due to its equity focus, Magnolia Mother’s Trust—a pilot in Jackson, Mississippi funded by the Economic Security Project—deserves some additional attention. The pilot provided $1,000 a month for one year to 20 black mothers living in extreme poverty.50 The project emerged out of a consultative process with community members, who elevated the need for cash as their main need.51 However, the basic income program was implemented as part of a set of interventions alongside other services, including connections with financial institutions and credit repair.52 The pilot found that beneficiaries used cash benefits to invest in education and skill building, and worked longer hours, counteracting common criticisms of a basic income that aid would disincentivize work and be misused.53 Other cities have also considered a basic income policy, even if they have not implemented one yet. The Economic Security Project and Jain Family Institute convened a task force in collaboration with the City of Chicago to work on social safety net reform—which proposed a guaranteed income pilot—and are working with Newark on a similar project.54 Other states and cities have also reached out to the Jain Family Institute about feasibility studies.55

50 “The Magnolia Mother’s Trust.” 51 Black, Interview with Rachel Black, administrator of Magnolia Mother’s Trust. 52 Black. 53 Black. 54 “BIG SHOULDERS, BOLD SOLUTIONS: ECONOMIC SECURITY FOR CHICAGOANS,” 4, 7-8; Nunez, Interview with Stephen Nunez at Jain Family Institute. 55 Nunez, Interview with Stephen Nunez at Jain Family Institute.

Literature Review on Basic Income

Overview Although examples of basic income are limited, a robust literature has developed on it, covering basic income’s design and implementation, benefits and risks of basic income policies, and simulations of those benefits and risks.

Designing and Implementing a Basic Income

Design While the idea of giving people unconditioned money seems simple, its mechanics are complicated. Obstacles to implementation include deciding on appropriate benefit levels,56 identifying eligible beneficiaries—for example, to households or individuals57—designing a payment distribution system, and designing an oversight system to ensure beneficiaries receive their payments.58 For example, it may be best to distribute benefits monthly, but distributing benefits annually alongside the taxation cycle may be administratively easier.59 Benefit levels could be equal for everyone, or tied to a person’s characteristics (e.g., age).60 Basic income could entirely replace existing benefit systems, or complement them.61

Financing Financing a basic income remains another question; proposals include raising taxes,62 distributing dividends from a permanent fund, and creating new money, although not all of these tools are available at the city level.63 A national-level proposal suggested eliminating tax deductions and tax credits, valued at $600 billion per year.64 Some academics have suggested

56 Desai and Palermo, “Some Effects of Basic Income on Economic Variables,” 92-94 57 Van Parijs, “Basic Income,” 10-12. 58 Wispelaere and Stirton, “The Many Faces of Universal Basic Income,” 269-272; Wispelaere and Stirton, “A Disarmingly Simple Idea?”, 115-118 59 Nunez, Interview with Stephen Nunez at Jain Family Institute. 60 Torry, “Is a Citizen’s Income Administratively Feasible?”, 120 61 Straubhaar, “On the Economics of a Universal Basic Income”, 2-3; Torry, “Is a Citizen’s Income Desirable?”, 123-124 62 Morgan, Reed, and Torry, “Analysis of the Financial Effects of Basic Income,” 191-193; Sampford, “Paying for a Basic Income,” 134; Straubhaar, “On the Economics of a Universal Basic Income,” 3 63 Andrade, Crocker, and Lansley, “Alternative Funding Methods,” 176-185; Desai and Palermo, “Some Effects of Basic Income on Economic Variables,” 93-94; Hartley and Garfinkel, “Income Guarantee Benefits and Financing: Poverty and Distributional Impacts," 2-3; Pereira, “Conclusion,” 103-105; Van Parijs, “Basic Income,” 20-22 64 Hartley and Garfinkel, “Income Guarantee Benefits and Financing: Poverty and Distributional Impacts,” 2

24 tying basic income to environmental goals through its financing mechanism, such as carbon pricing.65 Financing is also inseparable from the benefits of a basic income; a paper found that financing by just increasing tax rates—rather than eliminating tax deductions and credits—would limit the poverty-reducing effects from 13.2% to between 8% and 6.5%.66 The same paper found that using a carbon tax to finance the basic income would only reduce poverty by 1.5 to 4.5%, compared to 4% to 6.5% by increasing income taxes.

Eligibility Places must also decide on which participants are eligible. Eligibility is inseparable from program cost, and—like the choice of financing mechanism—the benefits of a basic income. Few basic incomes are truly universal; even Alaska’s excludes persons with a felony conviction in the last year.67 One paper simulating the effects of three national-level basic income policies found that the policy that reduced poverty most delivered half the monthly income of the other two programs but had broader eligibility.68 One of the authors also noted that the choice of financing mechanism in concert with eligibility affects the distribution of benefits between demographic groups.69 For example, using a value-added tax to finance a basic income and limiting the eligibility to adults imposes larger costs on large families without a corresponding increase in benefit. Similarly, restricting eligibility to ages below 65 could impose a tax on older people for a benefit they do not receive.

Benefits of a Basic Income Basic income proponents point to many potential benefits, summarized in table 3.

65 Howard, Pinto, and Schachtschneider, “Ecological Effects of Basic Income,” 113-114 66 Hartley and Garfinkel, “Income Guarantee Benefits and Financing: Poverty and Distributional Impacts,” 3-6 67 Gonzalez, Stanford Basic Income Lab Interview. 68 Hartley and Garfinkel, “Income Guarantee Benefits and Financing: Poverty and Distributional Impacts”, 4 69 Hartley, Interview with Rob Hartley at the Columbia School of Social Work.

Table 3: Potential Benefits Identified in Literature of Basic Income Policies Benefit Description Flexibility70 Because basic income is provided as cash without conditions on use, it offers recipients a flexible benefit that can help with adjusting to economic instability, sudden emergencies, or whatever best serves their needs, increasing their agency and avoiding the paternalism that can be associated with more- prescriptive forms of benefits Inequality/wealth redistribution71 With a progressive financing mechanism, even a universal basic income can distribute money from the more to less affluent De-stigmatize benefits72 A basic income could help shift paradigms from means-tested or work- conditioned benefits towards universal benefits, shifting away from norms of deserving/undeservingness and towards social inclusion, and gesturing towards modes of living and working beyond capitalist markets Access people excluded from Because basic income is not work-conditioned, it could reach persons with traditional service programs73 disabilities who are unable to work, and benefit women who bear disproportionate responsibilities for unpaid care work Increase worker bargaining Similarly, basic incomes can boost workers’ bargaining power by decreasing power74 their reliance for income on their employer; since so many low-income benefit programs are conditioned on work, it could increase low-wage workers’ leverage in particular Encourage personal With the insurance of a basic income, people may feel more comfortable investments75 making otherwise risky investments that could benefit them in the long-run

70 Bidadanure et al., “Basic Income in Cities,” 8-9; Gilbert, Huws, and Yi, “Employment Market Effects of Basic Income,” 56-57; Mays, Marston, and Tomlinson, “Neoliberal Frontiers and Economic Insecurity,” 7- 9; Mays, “Social Effects of Basic Income,” 77-79; Straubhaar, “On the Economics of a Universal Basic Income,” 75-81; Black, Interview with Rachel Black, administrator of Magnolia Mother’s Trust. 71 Mays, “Social Effects of Basic Income,” 82-88; Straubhaar, “On the Economics of a Universal Basic Income,” 78-79 72 Mays, “Social Effects of Basic Income,” 75-79; Torry, “From Feasibility to Implementation,” 156; Casassas, Raventós, and Szlinder, “Socialist Arguments for Basic Income,” 472-473 73 Mays, “Disability, Citizenship, and Basic Income,” 241-244; Miller, Yamamori, and Zelleke, “The Gender Effects of a Basic Income,” 134-136; Rocheleau, “Why a Universal Basic Income Is Better Than Subsidies of Low-Wage Work – GrowthPolicy.Org.” 74 Hartley, Interview with Rob Hartley at the Columbia School of Social Work. 75 Straubhaar, “On the Economics of a Universal Basic Income,” 77-78

Benefit Description Administrative efficiencies and A basic income could avoid costs associated with verifying recipients’ eligibility burdens76 and burdens involved in verifying participants’ eligibility and compliance

Critiques of Basic Income Substantive critiques of basic income include the program’s costs.77 Some have criticized the program’s universality as overbroad, and questioned whether benefit levels feasible to be universal would be adequate to meet its purported goals.78 As expressed in an assessment of a national-level basic income in the United Kingdom:79

“an affordable UBI would be inadequate, and an adequate UBI would be unaffordable… basic income policy design is subject to a three-way trade-off between the important goals of meeting need, controlling cost, and reducing the negative effects of means-testing; partial schemes are better equipped to ensure acceptable distributional outcomes, but fail to achieve many of UBI’s broader goals – including drastic reductions in bureaucratic complexity and the minimisation of poverty and unemployment traps – as effectively as full schemes.” The costs required to implement a national-level, truly-universal basic income in the US are high, and would require significant structural changes:80

“A universal payment of $12,000 per year to each adult U.S. resident over age 18 would cost roughly $3 trillion per year. This is about 75 percent of current total federal expenditures, including all on- and off- budget items, in 2017. (If those over 65 were excluded, the cost would fall by about one-fifth.) Thus, implementing this UBI without cuts to other programs would require nearly doubling federal tax revenue; even eliminating all existing transfer programs – about half of federal expenditures – would make only a dent in the cost.” Hoynes and Rothstein further demonstrate that—absent financing using a highly progressive tax and a generous benefit—doing away with all existing social services and replacing them with a basic income would have regressive effects, especially for the elderly and persons with disabilities:81

“This implies that were we to eliminate current income support programs and apply the funds towards a pure UBI, there would be a relative redistribution from low-earners to zero earners, but the first-order effects would be a massive distribution up the earnings distribution, along with a redistribution from the elderly and disabled towards those who are neither, primarily but not exclusively those without children.”

76 Pereira, “The Cost of Universal Basic Income,” 15, 17; Sampford, “Paying for a Basic Income,” 134; Straubhaar, “On the Economics of a Universal Basic Income,” 76-80; Torry, “Is a Citizen’s Income Behaviourally Feasible?”, 152 77 Bernstein; Greenstein, “Commentary: Universal Basic Income May Sound Attractive But, If It Occurred, Would Likelier Increase Poverty Than Reduce It.” 78 Bernstein; “Debating the Robot Takeover from The Weeds”; Hoynes and Rothstein, “Universal Basic Income in the United States and Advanced Countries,” 24 79 Martinelli, “Assessing the Case for a Universal Basic Income in the UK,” executive summary 80 Hoynes and Rothstein, “Universal Basic Income in the United States and Advanced Countries,” 6 81 Hoynes and Rothstein, 13

The political feasibility of UBI policies are also debated. Several previous UBI programs have been canceled or discontinued after political changes, sometimes paired with narratives of undeservingness (as described in more detail in the “Examining Basic Income Failures” section of this paper). Building coalitional support for basic income may involve cutting other social programs, compromising the program’s goals.82 A review of media coverage of three previous basic income experiments found that the media focused on automation concerns in legitimating the experiments, and work incentives in expressing concerns about the experiment.83 Critics of basic income have also proposed alternatives to accomplish similar goals, either more effectively or without the advocacy and implementation hurdles involved in pushing forward a basic income. These include modifying and expanding the US Earned Income Tax Credit;84 increasing low-cost credit options for people with low-incomes;85 providing universal basic services, rather than requiring people to purchase them; and establishing a job guarantee.86 While it is beyond the scope of this paper to fully compare the merits of each, the table below provides a brief summary of some advantages and disadvantages of each proposal:

Table 4: Comparison of Basic Income to Alternatives Advantages Disadvantages Program

Establishing a job  Can provide benefits beyond cash  Does not reach people who cannot work, or for  More targeted to vulnerable people whom choosing not to work may be a better guarantee decision (e.g., parents, students) 87  Administrative difficulties and cost  Less flexibility  Job quality 88 Earned Income-tax  Much research demonstrating high  Does not reach people without earnings participation rates, poverty-reducing  Incentivizes work for people who are better off Credit effects with low cost choosing not to89  Popular  Less flexibility  Available option for cities/states to supplement

82 De Wispelaere and Stirton, “The Politics of Unconditional Basic Income,” 916; Greenstein, “Commentary: Universal Basic Income May Sound Attractive But, If It Occurred, Would Likelier Increase Poverty Than Reduce It.”; Hoynes and Rothstein, 24 83 Perkiö, Rincon, and van Draanen, “Framing Basic Income,” 233-234, 247-248 84 “BIG SHOULDERS, BOLD SOLUTIONS: ECONOMIC SECURITY FOR CHICAGOANS,” 31-33 85 Denniss and Swann, “Consumption Smoothing with Basic Income,” 115-117 86 Gonzalez, Stanford Basic Income Lab Interview; Leff et al., “Alternatives to Basic Income,” 219-229 87 Hartley, Interview with Rob Hartley at the Columbia School of Social Work. 88 Rocheleau, “Why a Universal Basic Income Is Better Than Subsidies of Low-Wage Work – GrowthPolicy.Org.” 89 Rocheleau.

Advantages Disadvantages Program

Low-cost credit  Potentially lower cost  Problematic evidence from international  Incentivizes/enables investments development programs (e.g., debt-traps, access) options  Requires repayment, less flexibility

Universal basic  Gets at systemic issues that cash  Less flexibility cannot address  More complex to implement services

Evidence from Past Basic Income and Cash Transfer Policies In previous pilots, basic income and unconditional cash transfer programs have increased food sufficiency, well-being, children’s nutrition, earning power, gender equity in the household, health access and choice, school attendance, recipient investments, small business growth, decreased crime, decreased poverty, and reduced reliance on debt payments, with some effects persisting even years after pilots concluded.90 Despite accusations that unconditioned benefits will reduce work incentives, pilots have either shown no-to-negligible reductions in work or increases in access to work.91 While basic income policies can theoretically reduce administrative burdens, actually doing so is not a given; it depends on the program’s design. In a South African cash transfer program aimed at eleven million children:92

“Potential recipients experienced significant compliance costs, such as extensive documentation requirements, delay at welfare offices, and learning costs exacerbated by changes in the policy rules. As a result, most beneficiaries experienced disruptions in cash transfers, and four in five of those disruptions were made in error. Eligible beneficiaries lost resources, which had a negative effect of adolescent outcomes, resulting in greater rates of sexual activity, alcohol consumption, and criminal behavior” Research on another cash transfer program in India found that assisting applicants with forms and interceding with bureaucracies on behalf of applicants increased applications by 41%

90 Blattman et al., “The Returns to Microenterprise Support Among the Ultra-Poor,” 17-37; Davala, “Pilots, Evidence and Politics,” 375-380; Lapowsky, “Free Money”; Hanushek, “Non-Labor-Supply Responses to the Income Maintenance Experiments | Eric A. Hanushek,” 117; Haarmann, Haarmann, and Nattrass, “The Namibian Basic Income Grant Pilot,” 360-362; Kangas et al., “Suomen perustulokokeilun arviointi.” 91 Blattman et al., “The Returns to Microenterprise Support Among the Ultra-Poor,” 17-37; Blattman, Fiala, and Martinez, “Generating Skilled Self-Employment in Developing Countries,” 17-20; Calnitsky and Latner, “Basic Income in a Small Town,” 384-390; Davala, “Pilots, Evidence and Politics,” 377-378; Haarmann, Haarmann, and Nattrass, “The Namibian Basic Income Grant Pilot, 361-362”; Jones and Marinescu, “The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund,” 15-19, 27-28; Kangas et al., “Suomen perustulokokeilun arviointi”; Marinescu, “No Strings Attached,” 11, 16, 20 92 Herd and Moynihan, “TOWARD AN EVIDENCE-BASED APPROACH TO ADMINISTRATIVE BURDEN,” 265

29 and 70%, “especially benefitting more vulnerable women who were illiterate, lacked political connections, or had household autonomy”.93 However, it is uncertain how much we can conclude from basic income pilots, and how much existing pilots can answer remaining unknown questions about the value of a basic income, as described by Hilary Hoynes and Jesse Rothstein in their working paper investigating pilots.94 Pilots cannot show long-term effects or what effect universality would have—for example, in actually reducing stigma around receiving an income—and have not shown whether large income amounts produce different benefits than small; how benefit tradeoffs would work out in practice; or how a basic income could be financed. Notably, these critiques do not apply to Alaska’s program, although the authors note that Alaska’s annual benefit is well-below the level and amount of income they are examining.

Equity Implications of a Basic Income A basic income has important equity implications, although the basic income’s design plays a large role in determining what those are, and values are embedded in those design decisions. Because lower-income households start at a lower baseline income, even under a purely universal scheme they facially stand to benefit more relative to higher-income households (e.g., someone making $1,000 dollars a month experiences a 50% income increase from an additional $500, compared to someone making $10,000 a month95). Because the distribution of wealth and income in the US is racialized, even a universal income should benefit black and Hispanic households more than white.96 The income of the median white household is almost 10 times the median black household and more than 8 times the median Hispanic household; the median black household earned 59 cents on the dollar of the median white household, and the median Hispanic household earned 73 cents on the dollar; and poverty rates for black, Hispanic, and American Indian/Alaska native persons more than double white persons.97

93 Herd and Moynihan, 265. 94 Hoynes and Rothstein, “Universal Basic Income in the United States and Advanced Countries,” 22-24 95 This calculation ignores changes in tax brackets, and changes in means tested benefits for the lower- income household. 96 Assuming a non-regressive financing mechanism, and that gains are not offset by losses of other benefits. 97 “Nine Charts about Wealth Inequality in America (Updated)”; “Poverty Rate by Race/Ethnicity”; “Racial and Ethnic Income Gaps Persist amid Uneven Growth in Household Incomes.”

A paper simulating three national-level basic income programs—delivering $250 a month to all individuals under 6598, $500 to individuals between 19 and 64, and $500 to working individuals over age 18—projects that each would eliminate poverty in the US, at a cost of $720 billion to $1 trillion a year.99 The paper also examined the distributional implications of a basic income under three different proposals that phase out at $200,000.100 In all, the bottom decile of household income experienced around a 40-50% increase in income, while the top decile experienced a decrease in income of around 10-15%.101 The authors only found small effects on labor-force participation, and one author critiqued previous studies that found higher declines in labor-force participation for failing to account for investments recipients could make with earnings.102

98One of the authors explained that they chose 65 as a cutoff both for convenience, and based on the idea that people over 65 receive Social Security. Hartley, Interview with Rob Hartley at the Columbia School of Social Work. 99 Each proposal would begin phasing out at $150,000 in household income, decreasing 2% for each additional $1,000 in income. The paper uses a measure of poverty. Hartley and Garfinkel, “Income Guarantee Benefits and Financing: Poverty and Distributional Impacts,” 2 100 Hartley and Garfinkel, 1-4. 101 Hartley and Garfinkel, 5-6. 102 Hartley, Interview with Rob Hartley at the Columbia School of Social Work.

Figure 1: Distributional Effects of Different Basic Income Proposals103

A 2019 working paper attempted to model the effect of an annual $5,000 basic income for all residents of New York City (equivalent to $416.67 per month), financed by discretionary income taxes.104 The paper assumed an increase in total income taxes (including both labor and non-labor earners), and modeled different tax-levels and progressivity of taxes.105 Among other findings, the model predicted that a basic income would decrease income inequality106 by transferring wealth from higher-income residents to lower-income, and—counterintuitively—the basic income decreased rents, home-ownership rates, and housing construction, due to lower city-wide wealth and incomes caused by the income taxes used to finance it.107 The paper had

103 Hartley. 104 Esmkhani, Favilukis, and Nieuwerburgh, “Universal Basic Income and the City,” 2-5, November 25, 2019. 105 Esmkhani, Favilukis, and Nieuwerburgh, 2-5, 9-10. 106 Although not wealth inequality, due to changes in saving habits. 107 The model also predicted that the program would decrease work hours due to higher taxes, although empirical evidence on the effects of basic income have found little or no effect on hours worked

32 different predictions for changes to the composition of the city based on the progressivity of the tax rate. With a less- but still progressive tax, lower-income households leave the city center for the suburbs because they can afford larger dwellings, while wealthier households move to the center.108 With a more-progressive tax, wealthy and high-income households leave the center for the suburbs, and poorer households move in.109 This paper’s conclusions should be treated with a great deal of caution, because it is a working paper, and makes strong assumptions about changes in behavior without empirical backing. But it does get at necessary next-steps in research on basic-income: how would the effects of a basic income differ from pilots based on the financing mechanism and what secondary effects would a basic income have, including effects on affordability, population size, and—of particular note, since a basic income at the city or state level is spatially bounded—suburb-city dynamics.

Summary Existing literature on basic income offers a number of important takeaways in considering the potential of basic income in cities and states: 1) Design: Serious design questions remain for a permanent basic income program, and seemingly different design decisions are interconnected (explored in more detail in the “Evaluating and Designing Basic Income Policies” section). Choices of financing mechanism and eligibility affect the equity impacts of a basic income program. 2) Benefits: Basic income programs offer numerous potential benefits. Of particular note, policies can offer participants flexibility to use benefits to best suit their needs, can reduce stigmatization tied to existing social service policies, and administrative hurdles that limit participation in existing programs. 3) Critiques: Tradeoffs in designing basic income policies may severely limit their efficacy. Overbroad programs may offer too few benefits to reduce poverty and be too expensive, while targeted programs may not be able to gain political support and reduce access. Meeting the costs of basic income programs may require rolling back existing supports. 4) Evidence from pilots: Pilots show a range of benefits for participants, and help answer critiques that basic income will reduce work participation. However, there is a large gap

Matthews, “The 2 Most Popular Critiques of Basic Income Are Both Wrong”; Esmkhani, Favilukis, and Nieuwerburgh, “Universal Basic Income and the City,” 11-15, November 25, 2019. 108 Esmkhani, Favilukis, and Nieuwerburgh, “Universal Basic Income and the City,” 13-15, November 25, 2019. 109 Esmkhani, Favilukis, and Nieuwerburgh, “Universal Basic Income and the City,” 13-15, November 25, 2019.

between pilots and permanent policies, and existing pilots may not be able to answer questions about the effects of making the jump from one to the other. 5) Equity Implications: National level simulations suggest that a basic income policy could eliminate poverty, depending on its design. Working paper simulations at the city-level suggest it could reduce inequality, but would have several secondary effects that should be accounted for.

Examining Basic Income Failures

Overview The failures of some past basic income plans and pilots deserves additional attention, suggesting that a state or local basic income policy will still need to overcome a variety of forces to succeed. These include racism, institutional opposition, and entrenched political and social interests. As described by a professor at the University of Manitoba writing about the cancellation of the Ontario pilot, a project’s cancellation represents a violation of the moral responsibility researchers and governments have to their subjects:110

“Some 4,000 recipients of benefits in the pilot — the members of the “experimental” group — are now without the financial support that was promised to them. This abrupt and unexpected cancellation of the pilot by the Ford government amounts to a profound moral violation of the responsibility we have towards those who participate in research [emphasis added]. This obligation is consistent with, but also goes beyond, the responsibility of narrow ethical research techniques as approved by research ethics boards…While [stories of hardship after the program’s cancellation] may be anecdotal, they describe real and significant hardships for those who had been promised a chance for a better life” The same professor notes that even without cancellation, the knowledge that the pilot will end affects our interpretation of the research: “those with long-term assurance that their financial safety net is in place might take more risks and make longer-term plans to improve their economic situations”.111 Of note, failure is used here not to refer to the effects of the proposals and pilots—as those implemented were beneficial for many participants—but to their inability to fully actualize their initial goals, whether due to cancellation or rejection.

110 Mulvale, “The Cancellation of Ontario’s Basic Income Project Is a Tragedy.” 111 Mulvale.

Table 5: Summary Failed Basic Income Policies

Policy Name Description Goals Outcome Reasons for Failure and Date Used negative income Provide income Passed House, failed Conservative criticisms Family tax to provide a basic support to low-wage to make it out of that it disincentivized Assistance income, with some work- workers (esp. committee in the work; Southern Democrat Plan, proposed incentives Southern white Senate; succeeded concern that it would by Nixon workers); replace by the Earned increase wages of low- Administration Aid to Families with Income Tax Credit wage black workers in 1969 Dependent Children Provided 560 euros a Promote Ran for two years, Declining popularity of Finland Basic month to 2,000 jobless employment by de- but Centre Party Centre party; divisions in Income people conditioning cash on chose not to continue coalition government; Experiment, work, and based on program, and added criticisms over lack of 2017-2018 idea people will use work-search work-incentives; income for requirements to leadership change in employment-related existing bureaucracy; short investments unemployment timeframe and lack of benefits funding

Basic income payments Reduce poverty and Was supposed to run Conservative party won Ontario Basic for low-income residents inequality; for three years; early June 2018 elections from Income of three towns, with destigmatize cancellation liberal government that Program, 2017- phaseouts; up to benefits; cope with announced in 2018, started program; claimed March 2019 CA$17,000 a year for automation went into effect at without evidence one-person households, end of March, 2019 participants dropped out CA$24,000 for couples, and failed to file taxes, and an extra $6,000 for and cited lack of work persons with disabilities requirements in cancelling

program

A referendum on Respond to job Voted against in Lack of public support; Switzerland, whether to establish an losses due to referendum, 77% to opposition from political Basic Income unconditional basic automation; 23% establishment; criticism Referendum in income; proposed plan compensate unpaid over lack of work 2016

Policy Name Description Goals Outcome Reasons for Failure and Date would pay all adults care work; increased incentives. cost; 2,555 Swiss Francs, and worker choice over conservative political children 625 Francs jobs culture; already high standard of living

Nixon’s Family Assistance Plan Nixon’s Family Assistance Plan proposed a negative income tax to replace Aid to Families with Dependent Children, providing a national payment with optional state supplements.112 The plan incentivized work by disregarding the first $720 of earnings, providing transportation and day care services to beneficiaries, through phase-outs, and requirements to work or look for work for recipients other than mothers with small children.113 The Family Assistance Plan was motived by a bipartisan commission’s report finding that jobs alone could not address poverty and recommending an unconditional guaranteed minimum income, and out of concerns that Aid to Families with Dependent Children incentivized dependency and disincentivized family stability.114 To address both, the plan sought to supplement the wages of low-income workers—and in particular, low-income white workers in the South—and reduce participation in Aid to Families with Dependent Children.115 The plan’s benefits exceeded Aid to Families with Dependent Children, and initially received public and media support.116 However, liberal politicians and advocates called for higher benefit levels, while conservative politicians and the Chamber of Commerce criticized the tax-increases, lack of work incentives, and increased number of beneficiaries.117 Southern Democrats also joined the opposition for fear that the proposal would increase earnings of low- wage black workers, leading them to leave the labor market or demand higher wages.118 To bolster support for the program, the Nixon administration initiated four income maintenance experiments, releasing data from the first that work-effort actually increased among benefit

112 Meyer and Holtz-Eakin, Making Work Pay, 19. 113 “Fifty Years Later, Reflecting on the Defeat of Nixon’s Family Assistance Plan”; Meyer and Holtz- Eakin, Making Work Pay, 19-20. 114 “Fifty Years Later, Reflecting on the Defeat of Nixon’s Family Assistance Plan”; Meyer and Holtz- Eakin, Making Work Pay, 19-20. 115 “Fifty Years Later, Reflecting on the Defeat of Nixon’s Family Assistance Plan”; Meyer and Holtz- Eakin, Making Work Pay, 19-20. 116 Meyer and Holtz-Eakin, Making Work Pay, 19. 117 Meyer and Holtz-Eakin, 19-22. 118 Herd and Moynihan, “THE EARNED INCOME TAX CREDIT,” 198-200.

36 recipients in New Jersey (the first of the experiments to begin). Despite an audit by the then- Government Accounting Office confirming the validity of the New Jersey data, the experiment’s findings came under criticism for political bias.119 The main opponent of the program—Louisiana Democratic Senator Russell Long—attacked it for “paying people not to work,” rewarding the undeserving poor, and incentivizing people to “lay about all day making love and produc[ing] illegitimate babies;” proposed a work-bonus as an alternative; and later came to champion the Earned Income Tax Credit as a work-incentive replacement for Aid to Families with Dependent Children.120 As described by Douglas Holtz-Eakin and Bruce Meyer:121

“In defeat, the FAP portended the future course of welfare reform. ‘Welfare’ connoted indolence, a way of life; ‘poverty’ implied hard luck, a temporary condition of the down-and-out and a permanent condition of the disabled and aged. After the FAP, successful social policy proposals would have to meet both antipoverty and antiwelfare goals. They would have to fulfill pro-work, pro-growth, low-cost requirements.” In 1977, President Jimmy Carter proposed “a [negative income tax]-based cash assistance program coupled with a public service job program;” it did not make it out of committee, and a scaled-back proposal passed the House but not Senate two years later.122

Finland’s Basic Income Experiment Finland’s basic income experiment began in January 2017 and concluded at the end of 2018.123 The program gave 560 euros monthly to 2,000 randomly-selected participants between ages 25 and 58, selected among 175,000 recipients of unemployment insurance or labor market subsidies.124 The study sought to promote employment and measure the effects of basic income on “employment and wellbeing, drawing on registry, survey and interview data,” emerging out of concerns that Finland’s unemployment benefits discouraged work, and based on the premise that additional income could incentivize entrepreneurship or educational investments.125 Advocacy for a basic income in Finland began in the 1980s, but each time a proposal gained traction a recession shut it down.126 A slow recovery from the 2008 recession prompted the Centre Party—representing many farmers and rural residents—to base part of its 2015 campaign on a promise of basic income experiments, paired with debt reduction, reduced

119 Meyer and Holtz-Eakin, Making Work Pay, 21-22. 120 “Fifty Years Later, Reflecting on the Defeat of Nixon’s Family Assistance Plan”; Meyer and Holtz- Eakin, Making Work Pay, 20, 22, 25; Herd and Moynihan, “THE EARNED INCOME TAX CREDIT,” 199- 200. 121 Meyer and Holtz-Eakin, Making Work Pay, 22-23. 122 “The Temporary Assistance for Needy Families (TANF) Block Grant: A Legislative History,” 4. 123 Olli, Miska, and Minna, “Evaluation study on the basic income experiment.” 124 Olli, Miska, and Minna. 125 Olli, Miska, and Minna; Goodman, “Free Cash in Finland. Must Be Jobless.”; Jauhiainen and Mäkinen, “Opinion | Universal Basic Income Didn’t Fail in Finland. Finland Failed It.” 126 O’Donnell, “Why Basic Income Failed in Finland.”

37 wages, and a higher retirement age.127 Declines in the party’s political support after winning the election motivated them to press forward with the experiment in the hopes it would prove popular.128 The experiment was administered as part of a joint agreement between the Finland Ministry of Social Affairs and Health and Social Insurance Institution of Finland; participation was mandatory for selected recipients.129 While the initial experiment was only designed for two years, there were plans for a second, bigger experiment and hope that the government would continue financing after the initial period.130 However, in 2018 the government changed course, opting not to continue financing beyond the initial experiment and adopting requirements conditioning existing benefits (other than basic income) on looking for work.131 The government’s reversal stemmed from fears that basic income would disincentivize work, and that people should not receive benefits without looking for work.132 The pilot faced criticism from trade-unions (representing almost 70% of Finnish workers)—who feared that the program would “[undercut] the income-based unemployment insurance system” and disincentivize work through higher taxes—and the second-place party in the Centre government’s coalition, the center-right National Coalition Party.133 The minister of finance—a member of the National Coalition Party—intentionally chose not to raise taxes to fund the experiment, exposing it to attacks over feasibility and cost.134 Leadership changes in Finland’s bureaucracy replaced program supporters with opponents.135 The short timeframe and limited budget for the program limited the efficacy of the experiment.136 Finally, the program received attacks that it would reward people who did not seek employment and violated principles of work and reciprocity (i.e., that recipients use benefits to gain employment and then pay their fair share back in taxes), after the Centre Party used promoting employment to justify the experiment in the first place.137 Continued declines in the popularity of

127 Jauhiainen and Mäkinen, “Opinion | Why Finland’s Basic Income Experiment Isn’t Working”; O’Donnell, “Why Basic Income Failed in Finland.” 128 O’Donnell, “Why Basic Income Failed in Finland.” 129 Olli, Miska, and Minna, “Evaluation study on the basic income experiment.” 130 Jauhiainen and Mäkinen, “Opinion | Why Finland’s Basic Income Experiment Isn’t Working.” 131 Goodman, “Finland Has Second Thoughts About Giving Free Money to Jobless People.” 132 Goodman; Jauhiainen and Mäkinen, “Opinion | Universal Basic Income Didn’t Fail in Finland. Finland Failed It.” 133 Jauhiainen and Mäkinen, “Opinion | Universal Basic Income Didn’t Fail in Finland. Finland Failed It.”; O’Donnell, “Why Basic Income Failed in Finland.” 134 O’Donnell, “Why Basic Income Failed in Finland.” 135 O’Donnell. 136 O’Donnell. 137 O’Donnell.

38 the Centre Party after the rollout of the experiment138 led the party to announce the end of the experiment after the initial two-year period, and to condition unemployment benefits on increasing efforts to find employment.139 In its 2019 Parliamentary elections, the Centre Party dropped to the fourth-most seats and joined a coalition government led by the union-backed Social Democratic Party.140 Despite the decision not to continue the experiment and declines in support for the Centre Party, the experiment included a population survey measuring support for basic-income among the Finnish public. That survey found that 46% of respondents agreed at least partially that there should be a permanent basic income—typically citing difficulties making ends meet and labor market insecurity—and another survey in 2018 found that 51% of the population supported a partial basic income, compared to 21% opposed.141 The experiment also found that employment increased by 6 days for the treatment group during the second year of the study (in-part caused changes to unemployment benefits that increased their conditionality in the second year), but none in the first; and that the well-being of basic-income recipients improved compared to the control group, including decreased stress, depression, experiences with bureaucracy, better cognitive functioning, and improved financial well-being.142 At least one participant expressed surprise and concern at the government’s decision not to continue the program: “We all are in big trouble now to be honest, because would happen to you if your income decreased by €600?”.143

Ontario’s Basic Income Program Ontario began a basic income program in April 2017.144 The program gave more than 6,000 people in three towns earning less than CA$34,000 (or $48,000 as a couple) up to CA$17,000 a year145 (CA$1,416.67 a month; $24,000 a year for couple), with benefits reduced

138 But not necessarily caused by the experiment; its popularity had begun declining before the experiment. 139 Jauhiainen and Mäkinen, “Opinion | Universal Basic Income Didn’t Fail in Finland. Finland Failed It.”; O’Donnell, “Why Basic Income Failed in Finland.” 140 O’Donnell, “Why Basic Income Failed in Finland.” 141 Jauhiainen and Mäkinen, “Opinion | Universal Basic Income Didn’t Fail in Finland. Finland Failed It.”; Kangas et al., “Suomen perustulokokeilun arviointi.” 142 Kangas et al., “Suomen perustulokokeilun arviointi”; Dogra, “People Are Better Off With Universal Basic Income Than Unemployment Benefits, Says Study.” 143 Paddison, “This Country Gave People $640 A Month, No Strings Attached. Here’s What Happened.” 144 Paling and Tencer, “These Towns Are Trying Out A Basic-Income Scheme And It’s Already Changing Lives.” 145 The program also allowed participants with disabilities to claim an additional CA$6,000 a year, but conditioned on giving up state disability benefits Paling and Tencer..

39 by 50 cents for each dollar earned.146 The project was motivated by decreasing inequality and poverty, decreasing stigmatization associated with government assistance, responding to automation, and providing a benefit that would not disincentivize work.147 The program set out to evaluate basic incomes’ effects on health, food security, housing, education, and employment, measuring outcomes against a control group.148 The program was originally supposed to run for three years, but was cancelled after about one and a half, with final payments distributed in March 2019.149 In the 2018 parliamentary elections, the liberal party that implemented the pilot lost—for the first time in fifteen years—to Canada’s conservative party, whose leader campaigned on cutting income taxes and repealing carbon pricing.150 After its victory and despite earlier promising to continue the basic income experiment, the conservative party announced its cancellation, justifying its decision based on the program’s cost, its lack of work incentives, and unevidenced claims that participants had dropped out and failed to pay taxes.151 The government did not notify participants of the cancellation decision in advance, who found out from the media.152 Four participants brought and lost a lawsuit over the cancellation of the program, forcing participants to reapply for disability and social assistance benefits they had given up as a condition of accepting the basic income.153 Some participants also protested the decision to end the pilot, the mayors of participating town sent a letter to the Federal Government requesting they adopt the pilot, and two websites were started for pilot participants to voice their concerns about its cancellation.154

146 Lindeman, “Canadian Basic Income Recipients Are Suing Their Government”; Paling and Tencer, “These Towns Are Trying Out A Basic-Income Scheme And It’s Already Changing Lives.” 147 Lindeman, “A Lawsuit to Save Ontario’s Basic Income Program Has Failed”; Paling and Tencer, “These Towns Are Trying Out A Basic-Income Scheme And It’s Already Changing Lives.” 148 Paling and Tencer, “These Towns Are Trying Out A Basic-Income Scheme And It’s Already Changing Lives.” 149 “Canada’s Cancelled Basic Income Trial Produces Positive Results”; “March 2019 to Mark End of Ontario’s Basic Income Pilot”; “Ontario Is Canceling Its Basic Income Experiment.” 150 Cecco, “Canada”; DENETTE, “Doug Ford Has Won Ontario’s Election. What Happens Now?”; Elliott, “The Story of the Ontario Liberals’ 2018 Election Campaign.” 151 Lindeman, “Canadian Basic Income Recipients Are Suing Their Government”; “Ontario Is Canceling Its Basic Income Experiment”; “PC Government Says Ontario’s Basic Income Pilot Project Is ‘Failing’ | Globalnews.Ca”; “Universal Basic Income Had a Rough 2018.” 152 Lindeman, “Canadian Basic Income Recipients Are Suing Their Government”; Bizarro, “Ontario, Canada.” 153 Lindeman, “A Lawsuit to Save Ontario’s Basic Income Program Has Failed.” 154 “Basic Income Voices – The Voices of Conscience”; Bizarro, “Ontario, Canada.”

Surveyed participants in the pilot reported as benefits decreased stress and depression, improved food access, better housing, education, and skills training.155 In the wake of the program’s cancellation, participants reported problems basic income had helped them deal with (such as with health and anxiety) returning or worsening, difficulties re-adjusting their financial plans, and feelings of devastation, betrayal, and shock.156 Participants reported that even small amounts made big differences in their lives, and were faced with challenging decisions in the face of the government’s broken promise.157 One participant reported:158

“I feel hopeless ... Suddenly all of my options were removed and I was faced with giving up my schooling (which was already partially paid for), losing my home, or both.” Several reported depression; one described their feelings as:159

“Stressed, felt depressed, anxious, unsafe, threatened, disinterred, belittled, lied to and dismissed as a human being.” While 93.5% of respondents answered “no” when asked whether “basic income had a negative income [presumably, this was supposed to say impact160] on my life,” one participant was made materially worse off by the pilot because the first year of their basic income payments fell below the benefits they gave up, and the program was cancelled before their basic income payments adjusted back upward:161

“In another account, an individual left Ontario Works to join the pilot, saw an initial reduction in income even lower than the OW rate because it was based on the previous year’s earnings. If the pilot had continued, the benefit would have been recalculated based on more recent earnings and it would have more than tripled. With cancellation, however, that higher amount will not last long enough to compensate for the initial loss.”

Switzerland Basic Income Referendum In 2016, a referendum took place in Switzerland over whether to establish a basic income.162 Although the initiative only required a constitutional change “guarantee[ing] the introduction of an unconditional basic income” without specific amounts, its supporters advocated for paying all adults 2,500 Swiss Francs each month (equivalent to $2,555 in US

155 Forani, “‘Angel in Disguise’”; “Signposts to Success: Report of a BICN Survey of Ontario Basic Income Recipients,” 5 156 Forani, “‘Angel in Disguise’”; Lindeman, “Canadian Basic Income Recipients Are Suing Their Government”; “Signposts to Success: Report of a BICN Survey of Ontario Basic Income Recipients,” 5, 27-30 157 Lindeman, “Canadian Basic Income Recipients Are Suing Their Government”; “Signposts to Success: Report of a BICN Survey of Ontario Basic Income Recipients,” 27-29 158 “Signposts to Success: Report of a BICN Survey of Ontario Basic Income Recipients,” 29 159 “Signposts to Success: Report of a BICN Survey of Ontario Basic Income Recipients,” 29 160 It’s unclear from the report on survey results of the basic income program whether this misspelling made it into the survey, or was isolated to the report on the results of the survey. 161 “Signposts to Success: Report of a BICN Survey of Ontario Basic Income Recipients,” 30 162 “Swiss Voters Reject Basic Income Plan.”

41 dollars, or $30,660 a year), and children 625 Francs.163 In Switzerland, proposals that collect more than 100,000 signatures are put to a referendum.164 The proposal was ultimately rejected in 77% to 23% vote.165 Proponents cited inequality, people’s right to an income separate from work, the need to compensate unpaid care work, increased worker choice over jobs, and limited availability of jobs due to automation.166 Supporters also sought to increase awareness of basic income, independent of the referendum’s success.167 Opponents criticized the lack of work requirements, and said the proposal would attract migrants seeking the benefit.168 No parties expressed support for the proposal, most expressed opposition, and Switzerland’s Federal Council and Parliament also opposed it, claiming it would incentivize unemployment and require increased taxes and/or spending cuts to finance it.169 Opponents also said that a basic income would only risk disrupting the country’s economy, already-high living standards, and low unemployment rates.170 Finally, some attacked the proposal as Marxist.171 Some commentators expressed surprised that the vote was happening in Switzerland—due to its right-wing government and the country’s conservative politics—and the proposal polled poorly in advance of the referendum.172

Lessons for Basic Income Reviewing failed policies provides lessons for the development both permanent basic income policies and further pilots. Table 6 summarizes lessons future pilots and programs can take away from these four examples:

163 “Swiss Voters Reject Basic Income Plan.” 164 “Swiss Voters Reject Basic Income Plan.” 165 “Swiss Voters Reject Basic Income Plan.” 166 Frangoul, “What You Need to Know about the Swiss Basic Income Vote”; Minder, “Guaranteed Income for All?”; “Swiss Voters Reject Basic Income Plan.” 167 Pugh, “Why Switzerland’s Universal Basic Income Referendum Matters, Even Though It Failed.” 168 “Swiss Voters Reject Basic Income Plan.” 169 Frangoul, “What You Need to Know about the Swiss Basic Income Vote”; Minder, “Guaranteed Income for All?”; “Swiss Voters Reject Basic Income Plan.” 170 Minder, “Guaranteed Income for All?” 171 “Swiss Voters Reject Proposal to Give Basic Income to Every Adult and Child”; Minder, “Guaranteed Income for All?” 172 Frangoul, “What You Need to Know about the Swiss Basic Income Vote”; Wagner, “The Swiss Universal Basic Income Vote 2016.”

Table 6: Lessons for Future Basic Income Proposals from Failed Programs Lesson Description Applicable Places Across cultures, all proposals and programs were attacked for All 1) It can be difficult to disincentivizing work and rewarding people for not working. The chief overcome people’s opponent of the Family Assistance Plan became the architect of the EITC. unwillingness to offer The goal of the Finnish program was to promote work, and the implementing aid to people who are government paired their basic income program with conditions on not working unemployment benefits The then-Government Accounting Office’s verification of benefits from US, 2) Evidence of program negative income tax experiments did not stop critics from attacking the Finland, benefits can be experiment’s validity. Evidence that employment did not decline among Ontario inadequate to stave Finnish and Ontario beneficiaries did not stem criticisms over work- off opposition requirements, and neither did evidence that the pilots produced numerous other benefits for participants Most Americans supported the Family Assistance Plan and more Finns U.S., 3) Institutionally supported a Finnish basic income than opposed it, but institutionally- Finland connected actors can connected opponents—including from inside the bureaucracy, media, derail programs, industry, and influential politicians—contributed to the failure of each. independent of their Senator Russell Long did not even allow the Family Assistance Plan to popularity reach a vote in the Senate after it passed the House Even in time-limited pilots, participants make plans based on expectations to Ontario, 4) Participants suffer the receive their income for the announced duration of the pilot. Cancellations Finland consequences of disrupt those plans, impose psychological costs and put some participants in cancellations precarious situations (e.g., committing to a lease or educational program for which continued income is required) Even before parliamentary elections in Ontario, some recognized the risk to Ontario, 5) Shifting politics can the pilot from a liberal loss, and the conservative government cancelled the Finland threaten program pilot despite promising not to. In Finland, the Centre government’s decision durability to cancel the pilot stemmed from internal political divisions, declining popularity, and continued criticism over the program’s lack of work requirements. A change in bureaucratic leadership also hampered the pilot Southern Democrats opposed the basic income plan out of concerns it US 6) Especially in the US, would improve the bargaining power of low-wage, black Southern workers. racism and classism

Lesson Description Applicable Places can motivate Race and class-based opposition along similar lines can be expected for opposition future basic income proposals

Unique features of these examples provide reason for both optimism and caution. Idiosyncratic factors contributed to program failure in each place that might not repeat with a new program. The liberal government in Ontario launched its program the year before an election. Outside of its basic income program, the Centre party in Finland supported benefit conditionality. The Swiss economy was doing well at the time of the referendum. The Family Assistance Plan failed almost 50 years ago. It’s also reasonable to think that at least in some cities, there might be more unified-political support for a basic income than in these cases. However, other features of the examples suggest greater challenges for a new program. Both the Ontario and Finnish programs were pilots, not permanent programs, and still faced political obstacles. The Family Assistance Plan was popular with the public and got so far as passing the House and still failed. The Switzerland plan was rejected by the public, in part because people recognized risk in disrupting the country’s already-high quality of living; it’s possible similar dynamics could repeat in booming cities (although the most prosperous cities in the US are so unequal that many do not benefit from their growth), while cities with worse-off economies may not be able to afford a basic income.

Federal Social Services and Transfer Programs

Basic Income and Existing Federal Benefits A basic income policy at any scale of government needs to co-exist within an existing set of federal benefits policies. While the federal government does not provide a basic income, existing and past policies have some of the DNA of a basic income.173 Additionally, the unconditionality of a basic income inevitably creates frictions with the complexity and heavily- conditioned nature of existing benefit programs. Reviewing these programs can inform our understanding of: 1) The constraints of the system that any basic income program will need to operate in; 2) What that means for the prospects of a basic income; 3) Highlight the differences in design features and values between existing social services; and

173 Bidadanure et al., “Basic Income in Cities,” 5-6

4) illustrate what a basic income would represent within the US system for distributing wealth. The US system for delivering social services is defined by its complexity. Through a survey of federal agencies, the Government Accountability Office identified over 80 federal programs that provide assistance to low-income persons in the US:174

Figure 2: Federal Programs Targeted to Poor People175

In their working paper examining basic income, Hoynes and Rothstein use 6 categories to describe these policies:176 Table 7: Types of Social Service Programs177 Type Definition Examples

Programs “designed to transfer resources to 1) In-work  The Earned Income Tax Credit lower income individuals while encouraging programs  Child Tax Credit work,” restricted to workers and often phasing in and out at certain income thresholds. Policies providing an income floor, often with 2) Cash Welfare  Aid to Families with Dependent Children phaseout thresholds set at low earnings-levels  General Assistance and restricted eligibility (e.g., for mothers, persons  Supplemental Nutritional Assistance with disabilities, and the elderly) Program

174 Government Accountability Office, “Federal Low-Income Programs,” 10-12 175 Government Accountability Office, 10. 176 Hoynes and Rothstein, “Universal Basic Income in the United States and Advanced Countries,” 7-9 177 Hoynes and Rothstein, 7-9.

Type Definition Examples

Policies providing an income floor to people who 3) Cash welfare for  Social Security Income cannot work for medical reasons. individuals unable  Social Security Disability Insurance to work Policies that provide retirement benefits, without 4) Public  Social Security necessarily a phase in or out retirement benefits An income floor for families with children, often 5) Child allowance  Canada Child Benefit (non-US) with a phase out An income floor provided through the tax system, 6) Negative income  The Family Assistance Plan (failed) taxed away as earnings rise tax

Figure 2 excludes Social Security and Medicare, since they are not targeted to people with low incomes. Spending on Social Security and Medicare exceed the US’s combined spending on programs for low-income people.178 Figure 3: Federal Spending on Programs for the Poor Compared to Social Security and Medicaid179

US programs for low-income people are means-tested. The decision to means-test programs and the mechanism to assess means have important distributional implications. Participation rates in means-tested programs are much lower than non-means tested programs because of the administrative burdens they bring with them.180 It’s not that people who are eligible but do not participate do not want the benefit, but are unable to meet the learning, compliance, or psychological costs needed to access them. The most-vulnerable are often least

178 Government Accountability Office, “Federal Low-Income Programs,” 12-13. 179 Government Accountability Office, 13. 180 Herd and Moynihan, “INTRODUCTION,” 6-7.

46 able to jump through hoops needed to access benefits (because they need to spend their time just trying to make ends meet), so those who do participate may not be those most in need. Additionally, other conditions on low-income programs often limits access to the poorest; for example, by limiting benefits to workers, or by increasing benefits for married households. For these reasons, a program intended to target the most-needy can undercut how many people it can reach if those who it’s trying to reach need to jump through numerous hoops to claim their benefit. However, decreasing benefit access is often the point of imposing additional administrative requirements, out of often-racist ideas of who is worthy of receiving assistance, to incentivize work, and to reduce spending on the benefit. Programs to assist the poor exist along a continuum of redistributive government policies; on the same continuum are taxes and subsidies. The Urban Institute has examined the distribution of asset-building tax-subsidies in the US, finding that programs disproportionately benefit high-income Americans.181 Programs like the mortgage interest tax deduction reward persons with incomes high enough where it’s worth it to itemize their deductions (rather than take the standard deduction; only one-third of tax-filers itemize their deductions), and scales in benefit with the size of the homeowner’s mortgage.182 Lower income persons are less likely to work at employers that sponsor retirement plans, have less income to defer towards retirement, and are less able to defer income.183

181 “Nine Charts about Wealth Inequality in America (Updated)”; Steuerle et al., “Who Benefits from Asset- Building Tax Subsidies?,” 1-3 182 Gale, “Gutting the Mortgage Interest Deduction”; “Mortgage Interest Deduction Is Ripe for Reform.” 183 Steuerle et al., “Who Benefits from Asset-Building Tax Subsidies?,” 1-3

Figure 4: Distributional Implications of US Tax Subsidies184

The US system of taxation is also regressive. The income of the poor is taxed at a higher rate than the wealthiest, due to tax-exclusions for the assets of the wealthiest and because taxes on consumption represent a larger share of the poor’s income than the wealthy.185

184 “Nine Charts about Wealth Inequality in America (Updated)”. 185 Saez and Zucman, The Triumph of Injustice, xi, 13-20.

Figure 5: Effective Tax Rates by Income Group186

Review of Selected Federal Benefits Policies Table summarizes key policies whose design and development could be instructive for basic income, before delving into them more deeply.

186 Saez and Zucman, 14.

Table 8: Comparison of Basic Income to Existing and Previous Federal Benefits Programs

Policy Administrator Form of Eligibility Benefit Number of Differences Benefit Amounts beneficiaries from Basic and Income participation rate

Earned Income IRS, through Phased in, Low-income Max: $519 for 29 million Benefits only for Tax Credit tax system refundable taxpayers childless people; 78% income-earning tax-credit, worker; participation taxpayers; varying $6,431 for a benefits initially based on three-child increase with family size family income; much Average higher benefits benefit for workers with amount: families $2,632

Unemployment Department of Time-limited, Workers Average: 29% Benefits only for Insurance Labor weekly (excluding $350 weekly workers, and oversees, payments independent for 15 weeks only certain states amounting to contractors, Range: $213 types of workers administer about half of part-time to $546 (e.g., not recipients’ workers) across states independent prior wages contractors); benefit levels tied to wages; time-limited benefit; numerous administrative hurdles and application requirements

Aid to Families US Monthly Low-income, Median: $600 68% in last Targeted to low- with Department of payments single-parent per month year of income families; Dependent Health and varying by households; Range: $190 AFDC, now benefits scale, Human state and with TANF, per month to 22% as and decline Children Services family size, limited to $1,100 per TANF quickly with (replaced by phasing out those month income; more TANF) at low- seeking work requirements incomes and limitations under TANF

The Earned Income Tax Credit (EITC) The Earned Income Tax Credit provides a tax credit for low-income taxpayers whose income falls into a qualifying range.187 Benefit amounts phase in as a percentage of earned income, plateau at a maximum benefit level, and then phase out as income continues to rise.188 EITC benefits also vary based on how many children the recipient has and the recipient’s filing status (e.g., married or single).189 Because the credit is income-based, recipients must be working to receive the credit.190 The credit offsets recipients’ tax liability, and any excess can be refunded as cash (e.g., if someone owes $1,000 in taxes and receives a $2,000 benefit, they can refund $1,000 in cash).191 Benefit levels are set in federal statute. In 2019, $63 billion was distributed through the EITC, with an average of $2,476 going to 25 million taxpayers.192 The Government Accountability Office and Budget on Policy Priorities have both reported on the high improper payment rate of the EITC (around 22 to 26%), caused by complex eligibility and filing rules mostly surrounding children and residency status.193 The EITC provides higher benefits for families with children: “In 2018, the maximum credit for families with one child is $3,461, while the maximum credit for families with three or more children is $6,431…childless workers can receive a maximum credit of only $519.”194 Additionally, benefits phase out later for families with more children.

187 “What Is the Earned Income Tax Credit?” 188 “What Is the Earned Income Tax Credit?” 189 “What Is the Earned Income Tax Credit?” 190 “What Is the Earned Income Tax Credit?” 191 “Chart Book.” 192 “Statistics for Tax Returns with Eitc | Earned Income Tax Credit.” 193 “Refundable Tax Credits”; “Reducing Overpayments in the Earned Income Tax Credit.” 194 “What Is the Earned Income Tax Credit?”

Figure 6: EITC Distribution by Family Size and Income195

The EITC participation rate—meaning the percentage of people who are eligible who participate—is 78%,196 which exceeds the “30 to 60 percent typical of means-tested programs”.197 The EITC is also a popular program. Its supporters include businesses who view the EITC as a taxpayer-funded alternative to business-borne minimum wage increases, and the tax- preparation industry, who charge fees for assuming the burden of filing for the EITC, and who lobby to keep EITC documentation requirements high enough to be difficult for low-income tax filers.198 Employers’ interests in the EITC—as subsidies for workers whose costs employers are not responsible for—incentivizes them to help expand workers’ access to it.199 Unlike many other social service programs, the program is administered by the IRS through the tax system, with uniform rules across states and localities and tax compliance fraud systems, limiting opportunities for states to layer on requirements and keeping administration costs low.200 The demonstrated benefits of the EITC include “increased labor market participation, poverty

195 “What Is the Earned Income Tax Credit?” 196 IRS, “About Eitc | Earned Income Tax Credit.” 197 Herd and Moynihan, “THE EARNED INCOME TAX CREDIT,” 191. 198 Herd and Moynihan, 202-212. 199 Herd and Moynihan, 192, 201-203. 200According to the IRS, “of administering the EITC program ratio to claims paid is less than one percent.” IRS, “About Eitc | Earned Income Tax Credit”; Herd and Moynihan, “THE EARNED INCOME TAX CREDIT,” 193, 198, 210-211.

52 reduction, and improved health and education outcomes;” absent the ETIC, in 2014 the poverty rate would have been more than 3% higher and the child poverty rate 6% higher.201 However, there is also evidence that the EITC can restrict wage growth among workers.202 The popularity of the EITC offers interesting lessons for basic income. As described previously, the EITC was passed as a work-incentivizing alternative to the Family Assistance Plan, initially intended to replace Aid to Families with Dependent Children.203 The legislative development of the EITC reflected a much less contentious process than the Family Assistance Plan (discussed in the “Examining Basic Income Failures” section):204

“The EITC provisions were included in a routine tax bill that passed in 1975 with little fanfare and almost no opposition. Long cut the aspects of the FAP that most concerned fellow Southern Democrats and businesses. The EITC was originally a temporary measure, not becoming a permanent part of the tax code until 1978. The modest size and temporary nature of the original version of the EITC, embedded in the tax bill, drew much less attention than the FAP proposal.” Once the EITC was implemented, “the policy created its own supporter[s]” and the Carter administration made the program permanent: businesses came to recognize it as a taxpayer-subsidized alternative to minimum-wage increases, bonuses for employees’ to purchase their own equipment, and a potential substitute for higher wages for low-wage workers; and politicians as something businesses would get behind to achieve similar ends as minimum-wage increases.205 Private tax preparers also came to support the benefit—while erecting obstacles to claiming it that only they could resolve--as another revenue source.206 Over the coming decades, the EITC would periodically be expanded in political battles over minimum wage increases, and industry came to support institutional advocates for the EITC such as the Employment Policies Institute.207 While the EITC remains popular, in recent years it has faced more (bad-faith208) criticism over potential fraud, with calls for increased administrative requirements—and their concomitant burdens—such as verification checks; in the face of these criticisms and despite budget cuts, the IRS has worked to simplify the process of claiming benefits.209

201 Herd and Moynihan, “THE EARNED INCOME TAX CREDIT”, 193-194 202 Herd and Moynihan, 205-206. 203 Herd and Moynihan, 200; Meyer and Holtz-Eakin, Making Work Pay, 15, 23, 25. 204 Herd and Moynihan, “THE EARNED INCOME TAX CREDIT,” 200. 205 Herd and Moynihan, 201, 202-207. 206 Herd and Moynihan, 206-211. 207 Herd and Moynihan, 203-206. 208“About 6 percent of tax revenue lost due to individual tax noncompliance is due to EITC overpayments, relative to 52 percent lost due to individuals’ underreporting business income.” Additionally, “despite repeated calls for additional resources to address the tax gap, the IRS has seen its funding cut and efforts to curb the tax gap derailed. At the same time, it has faced marked pressures to focus on the EITC relative to other areas of noncompliance” Herd and Moynihan, 208. 209 Herd and Moynihan, 210-212.

Despite the high participation rates, the EITC still carries some administrative burdens. Although the IRS sends reminders to people who appear to be eligible and takes other measures to advertise the program, surveys suggest as many as 43% of those eligible may not be aware of the program, and the eligibility information form is 37 pages.210 Recipients claim the benefits by filing taxes, a process:211 1) made difficult because of tax-preparation industry lobbying—including by trumpeting fears of fraud from self-filing to claim the EITC—and whose difficulty is often resolved by paying a tax preparer; and 2) a process that can subject claimants to extremely time-intensive, confusing audits by the IRS that can potentially disallow them from continuing to claim the benefit for two years. It also does not reach those not engaged in the workforce.212 Unlike many other social service programs, there is not much evidence that recipients experience stigma from claiming the EITC, due to its framing as a reward for work and because participants do not need to subject themselves to intrusive questions to claim the benefit.213

Unemployment Insurance The US delivers unemployment insurance through a joint federal and state structure, which provides recipients a proportion of wages (about half, according to the Center on Budget and Policy Priorities) they earned at their previous job before becoming unemployed.214 The US Department of Labor oversees state-administered unemployment insurance programs, which must meet baseline federal requirements.215 States set eligibility requirements, and have flexibility over benefit levels, maximum benefit duration, and other administrative matters (e.g., tests for whether workers are eligible for benefits).216 As of January 2020, “average weekly benefits were about $385 nationwide but ranged from a low of $213 in Mississippi to $546 in Massachusetts.”217 Benefits are largely paid by the states, and financed through a combination

210 Herd and Moynihan, 195. 211 Herd and Moynihan, 194-198. 212 Black, Interview with Rachel Black, administrator of Magnolia Mother’s Trust. 213 Herd and Moynihan, “THE EARNED INCOME TAX CREDIT,” 198; Sykes et al., “Dignity and Dreams: What the Earned Income Tax Credit (EITC) Means to Low-Income Families,” 244-245, 257-259 214 “Policy Basics.” 215 “Unemployment Insurance,” 3-4. 216 “Comparison of State Unemployment Laws 2019, Employment & Training Administration (ETA) - U.S. Department of Labor,”1-2 - 1-5, 1-8 - 1-10, 3-21-3-25; “Unemployment Insurance,” 3-5 217 “Policy Basics.”

54 of state and federal payroll taxes.218 Recipients claim benefits by filing claims with their state agency weekly or bi-weekly.219 In fiscal year 2017, “claimants remained on the program for an average of 15 weeks”.220 Applicants must be “actively seeking work” to receive benefits; states have discretion over tests to meet this criteria.221 Some states provide unemployment insurance recipients additional assistance finding jobs through an Employment Service office or through federally-funded Reemployment Services and Eligibility Assessments.222 The US unemployment insurance system is laden with administrative burdens. Benefit levels, eligibility criteria, and state-funding levels vary in generosity across states.223 Many states devote few resources to assisting applicants and use computer systems from the 1950s; in 2017, “investment in UI administration was at a 30-year low.”224 State-constructed obstacles for applicants include checks to show that applicants meet the requirement of “actively seeking work;” some states require applicants to make a certain number of contacts to remain eligible.225 Unemployed workers need to have earned a minimum amount at their last job to claim benefits (varying by state), and those who quit their jobs or are fired for cause cannot claim benefits.226 Employees must have their former employers verify that they lost their job through “no fault of their own” but employers with more workers on employment insurance pay higher unemployment taxes, incentivizing employers to refuse employees’ verification.227 State agencies adjudicate eligibility disputes, creating:228

“contentiousness, administrative hearings, and confrontations at which some workers may be better skilled and others may prefer to avoid altogether. It also produces incorrect denials and errors…A 2010 report from the Benefit Accuracy Measure Program of the Employment and Training Administration reveals that 9 percent of [UI appeals] denied based on monetary ineligibility and separation issues, and 19 percent of those denied based on non-separation issues, were incorrect. Employers had total or contributory responsibility in 35 percent of incorrect separation denials and in 44 percent of monetary denials.”

218 “Comparison of State Unemployment Laws 2019, Employment & Training Administration (ETA) - U.S. Department of Labor,” 2-1 - 2-4; “Unemployment Insurance,” 3. 219 “Unemployment Insurance,” 4. 220 “Unemployment Insurance,” 4. 221 “Unemployment Insurance,” 4-5. 222 “Unemployment Insurance,” 5. 223 Stewart, “The American Unemployment System Is Broken by Design.” 224 Van Erden, Squire, and Hewko, “Unemployment Insurance Administrative Funding,” 2; Stewart, “The American Unemployment System Is Broken by Design”; Kelly, “Unemployment Checks Are Being Held up by a Coding Language Almost Nobody Knows.” 225 Enchautegui, “Disadvantaged Workers and the Unemployment Insurance Program,” 2-6. 226 Desilver, “Not All Unemployed People Get Unemployment Benefits; in Some States, Very Few Do”; Enchautegui, “Disadvantaged Workers and the Unemployment Insurance Program,” 2. 227 Enchautegui, “Disadvantaged Workers and the Unemployment Insurance Program,” 4-5. 228 Enchautegui, 4.

States also differ in what reasons are acceptable for leaving a past job and claiming unemployment insurance; four states disallow illness as an acceptable reason.229 Despite federal incentives to expand access as part of the American Recovery Act, not all states accepted incentives and others contracted their unemployment programs.230 These difficulties—sometimes created by design, as in Florida—have shown up in force during the intense increases in demand of COVID-19, as states process claims slowly and run out of funding to meet their claims.231 As a consequence, only 29% of unemployed people accessed unemployment benefits in March 2020 (even before the brunt of COVID-19’s effects were felt), and participation varied highly across states.232

229 Enchautegui, 2-3. 230 Enchautegui, 2-3. 231 Stewart, “The American Unemployment System Is Broken by Design.” 232 Desilver, “Not All Unemployed People Get Unemployment Benefits; in Some States, Very Few Do.”

Figure 7: Unemployment Insurance Participation Rates by State233

The design of unemployment insurance includes exclusions that help explain its low participation rate. Disadvantaged workers—including black and Latinx workers, single-mothers, and people with low education—are more likely to experience unemployment but 33% less likely to claim unemployment insurance, bearing the brunt of burdens and exclusions.234 Reflective of its design as a program to assist white workers, the states with the lowest participation rates in unemployment insurance (i.e., the percent of unemployed people receiving insurance) have

233 Desilver. 234 “Enchautegui, “Disadvantaged Workers and the Unemployment Insurance Program,” 3-6.

57 higher percentages of black and Latinx residents compared to states with the highest participation rates.235

Aid to Families with Dependent Children/Temporary Assistance for Needy Families Aid to Families with Dependent Children (AFDC) was established by the Social Security Act of 1935 and existed until 1996.236 AFDC provided a grant to states to provide cash to single- parent households.237 Benefit amounts varied by state (for a family of three, “from $190 per month in Mississippi to $1,100 in Suffolk County NY in 2017 dollars,” with a median of $600) and number of children, phasing out around $8,600 a year for a family of three.238 States were required to provide aid to all people living in their states who met federal requirements and state income and resource limits.239 In the context of increasing numbers of families on AFDC and two decades of AFDC benefit cuts, state experiments in restrictions on AFDC, and racialized discourse around reducing AFDC dependency, 1992 presidential candidate “Bill Clinton promised to ‘end welfare as we know it” by setting time-limits on assistance and incentivizing work.240 In 1996 after several draft proposals, failed bills, and negotiation, President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, replacing AFDC with Temporary Assistance for Needy Families.241 Table 9 summarizes relevant differences between the two programs:

235 Enchautegui, “Disadvantaged Workers and the Unemployment Insurance Program,” 4; Stewart, “The American Unemployment System Is Broken by Design.” 236 OFFICE OF THE ASSISTANT SECRETARY and FOR PLANNING AND EVALUATION, “Aid to Families with Dependent Children (AFDC) and Temporary Assistance for Needy Families (TANF) - Overview.” 237 Hoynes and Rothstein, “Universal Basic Income in the United States and Advanced Countries,” 8, 18- 19; OFFICE OF THE ASSISTANT SECRETARY and FOR PLANNING AND EVALUATION, “Aid to Families with Dependent Children (AFDC) and Temporary Assistance for Needy Families (TANF) - Overview.” 238 Hoynes and Rothstein, “Universal Basic Income in the United States and Advanced Countries,” 8. 239 OFFICE OF THE ASSISTANT SECRETARY and FOR PLANNING AND EVALUATION, “Aid to Families with Dependent Children (AFDC) and Temporary Assistance for Needy Families (TANF) - Overview.” 240 “The Temporary Assistance for Needy Families (TANF) Block Grant: A Legislative History,” 5-9; Soss, Fording, and Schram, Disciplining the Poor, 35-38, 66, 293-294; Mannix and Freedman, “TANF and Racial Justice,” 221-222, 224. 241 “The Temporary Assistance for Needy Families (TANF) Block Grant: A Legislative History,” 8-9.

Table 9: Major Differences between AFDC and TANF242 Feature AFDC TANF Difference

Encourage caring for Four goals: 1) assist needy families in Limiting participation is a Purpose children in their homes, their own homes; 2) end “dependence of TANF goal; racialized, and support their needy parents on government benefits” 3) heteronormative ideas caretakers in doing so “reduce out-of-wedlock pregnancies” and about appropriate family 4) “promote the formation and structures embedded in maintenance of two-parent families” statute

All eligible Individuals are Individuals are not entitled to benefits Reduces eligible persons’ Entitlement entitled to benefits rights to benefits

No time limit on receiving Maximum of 60 months (absent an Limits availability of aid Duration benefits exemption, which can only be given to 20% of a state’s cases); 21 states set lower maximums Funds must be given to Funds can be spent on purposes other States incentivized to Use of individuals as cash aid than cash aid, and do not need to be reduce participation Funding spent on individuals Starting in 1988, states State block grant funding is reduced More difficult for Work and job funding for AFDC was unless they meet work activity participants to meet work requirements reduced unless they assist requirements; limited categories of requirements participants in finding jobs, acceptable work activities (e.g., limits on which included education education and training for adults); states and training; some groups get credit towards meeting work exempt from work participation rates if their caseload has requirements fallen since 2005; no groups categorically exempt

Through TANF, the federal government gives states $16.5 billion in the form of block grants,243 primarily to spend on services for low-income families.244 Although states have

242 “Welfare to Work,” 10-21; “The Temporary Assistance for Needy Families (TANF) Block Grant: A Legislative History,” 9-11; “Policy Basics: Temporary Assistance for Needy Families”; Mannix and Freedman, “TANF and Racial Justice,” 223-224. 243 In the form of a block grant. 244 “Temporary Assistance for Needy Families,” 1. Although states can use a share of funding for services directed beyond just low-income families.

59 flexibility over TANF spending, the federal government sets some baseline requirements, including work activity requirements and time limits on benefits. States generally cannot use federal TANF funds for legal immigrants unless they have been in the US for at least 5 years.245 States must also meet a “Maintenance of Effort Requirement”—in which they provide a certain amount of matching funding for TANF-supported programs (in 2018, states collectively spent about $15 billion)—or face penalties.246 The amount of federal funding for TANF has remained static since 1996; because it hasn’t changed with inflation, the real value of federal funding has declined by about 40%.247 TANF applicants must meet “work activities” requirements or face penalties (such as benefit termination).248 Examples of “work activities” include employment, job searches, and skills training.249 To meet federal work participation standards, 50% of families in a state receiving TANF cash assistance need to engage in work activities a set amount of hours per week (varying based on family size; a two-parent family without federally subsidized child care assistance must work at least 35 hours a week collectively) and 90% of two-parent families need to engage in work activities.250 There can be differences between what work activities applicants must engage in to continue receiving TANF benefits in a state, and what activities are counted towards federal participation requirements that determine whether states face penalties. For example, states might allow applicants to include hours spent providing child care for others in their TANF calculation, while the federal government would not count that activity towards state requirements.251 States also have flexibility over when recipients must begin meeting work activity requirements after they begin receiving benefits (e.g., upon their application, upon receiving a benefit, or after some time period), and exemptions that can be more or less restrictive than federal exemptions on states:252

“For example, single parents with children under a year old and parents caring for a disabled family member are exempt from the federal calculation of a states’ work participation rate, but the state may choose to

245 “Policy Basics: Temporary Assistance for Needy Families.” 246 “Policy Basics: Temporary Assistance for Needy Families.” 247 “Policy Basics: Temporary Assistance for Needy Families.” 248 “Policy Basics: Temporary Assistance for Needy Families.” 249 For certain work activities, there are limits in the number of hours that are counted towards federal participation requirements. For example, for one individual, job searches are only counted for 6 weeks- worth of hours towards federal requirements over the course of a year. 250 States can receive credit towards meeting these goals if their caseload has fallen since 2005, or if they spent more on TANF than required Hahn et al., “Work Requirements in Social Safety Net Programs: A Status Report of Work Requirements in TANF, SNAP, Housing Assistance, and Medicaid,” 5-7, 25; “Policy Basics: Temporary Assistance for Needy Families.”. 251 Hahn et al., “Work Requirements in Social Safety Net Programs: A Status Report of Work Requirements in TANF, SNAP, Housing Assistance, and Medicaid,” 5-7, 25. 252 Hahn et al., 6.

require them to engage in work activities nonetheless, or the state may choose to exempt them for a longer period” States also determine penalties families face for failing to meet work requirements, ranging from warnings to benefit terminations. The effect of TANF’s time-limits and stricter work requirements has been to reduce participation in the program from AFDC’s levels substantially, in part due to increased sanctions of participants.253 Figure 8: Participation in AFDC/TANF Over Time254

Restrictions in AFDC and the development of TANF emerged in the context of broader changes in poverty governance fueled by racist imagery of the poor. As described by Joe Soss, Richard Fording, and Sanford Schram:255

“From the 1960s on, conservatives brandished the troubled lives of the poor as evidence of liberal failure and as a wedge issue to divide the Democratic Coalition. Pathological images of poor, minority neighborhoods became a repository for diffuse public anxieties, personified by the lazy and licentious welfare queen and the violent, drug-dealing gangbanger. A new ‘underclass’ was discovered, and its problems were folded into a broad narrative of declining morality and authority. Blame was laid squarely at the feet of liberals, whose ‘permissive’ policies had coddled criminals and failed to enforce social obligations. To restore personal responsibility and social order, state authority would have to be deployed in a more

253 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 24; Mannix and Freedman, “TANF and Racial Justice,” 223-225. 254 “Policy Basics: Temporary Assistance for Needy Families.” 255 Soss, Fording, and Schram, Disciplining the Poor, 293-294.

disciplined and disciplinary manner—one that emphasized the bottom lines of efficient performance and effective results” The statutory goals of TANF reflect this imagery, with its ideas of reducing dependency, promoting two-parent families, and reducing out-of-wedlock pregnancies. Race played the ultimate factor in the passage of welfare reform, cutting across party lines:256

“Amid the bipartisan ‘national consensus’ on welfare reform, differences in labor markets and partisan control briefly ceased to matter; the racial identities of target groups emerged as a singularly powerful predictor of the policy choices that stood at the heart of a thoroughly racialized project” Devolution from the federal government to state agencies in TANF fueled further discrimination, linked to logics of incarceration:257

“After 1996, state policy choices produced a tight triadic relationship linking larger black population rates, more disciplinary and localized [TANF] regimes, and more aggressive correctional control. Welfare fraud was drawn into the orbit of draconian criminal penalties, and sanctions restructured welfare participation around a (racially biased) logic of violation and penalties.” In an illustrative example, twenty-two states implemented family caps after the 1990s, denying TANF benefits to children born to parents already-enrolled in TANF based on anti-black stereotypes of black women conceiving more children to claim more benefits; 13 states still have them.258 In reviewing research on racially disparate impacts of TANF, Mark Mannix and Henry Freedman find that:259  states with the most black TANF recipients had the biggest decline in poor children receiving AFDC/TANF benefits after its creation;  that the fourteen states devolving TANF authority to localities (increasing opportunities to apply TANF discriminatorily) had higher concentrations of black residents;  that black women and Latinas are more likely to be sanctioned than white women;  that harassment and sanctions caused participants to leave TANF;  And that frontline staff in TANF often make racially-biased decisions when they have discretion to discipline participants.

Lessons for Basic Income Examining US policies for providing social assistance and distributing wealth reveals a portrait of a complex, racialized, and often-regressive system that relies heavily on incentivizing work and liming which members of the poor can access benefits. Investigating specific policies

256 Soss, Fording, and Schram, 299. 257 Mannix and Freedman, “TANF and Racial Justice,” 223-225; Soss, Fording, and Schram, Disciplining the Poor, 295-296. 258 “States Should Repeal Racist Policies Denying Benefits to Children Born to TANF Families.” 259 Mannix and Freedman, “TANF and Racial Justice,” 224-225.

and their development reveals a similar picture, even with a policy in the EITC with significant evidence of benefits for the poor. Those developing a basic income policy at the state and local level should be mindful of this system and the constraints it imposes, with specific lessons described in table 10. Table 10: Lessons for Basic Income Policies from a Review of Existing Federal Benefits Lesson Description

US social service programs tend to center the idea that the poor should be working 1) Cultural norms of instead of receiving aid, that to receive aid without working for any extended period of incentivizing work and time is a deliberate choice (perhaps reflecting fraud by the recipient), and that punishing “dependency” programs should include numerous checks that limit recipients’ abilities to claim aid. through administrative Any basic income program will need to overcome this bias burdens remain strong Inseparable from the first lesson, social service policies have been legitimated using 2) Racial discrimination racially discriminatory language, designed and applied in racially discriminatory ways, informs both policy and produced racially disparate impacts. A basic income policy is unlikely to be development and immune from these forces, and advocates should explicitly consider and guard against application them

Because other benefits are means-tested, low-income participants in basic income 3) Basic-income recipients programs could lose or get reduced access to other benefits by participating. This could could face a cliff effect offset the benefits of basic income for these participants, especially if they do not because of how heavily understand they risk their eligibility for other benefits by participating other benefits are means-tested Devolution from the federal government to states (and some states to localities) in 4) Devolution to states and TANF allowed some states to make it harder for participants to access benefits; localities has often variation in unemployment insurance schemes produces similar effects. Basic income made it harder for the at the local level could allow some states and localities to pursue equity policies poor to access benefits, unfeasible at the national level, but others—if they pursued basic income at all—may not easier be likely to include the exclusionary design features that characterize many TANF and unemployment insurance schemes

The popularity of the EITC and existence of the AFDC as a cash-transfer program 5) The policies closest to a could suggest hope for basic income schemes. However, part of the EITC’s success basic income offer points of caution

Lesson Description

stems from remaining conditioned on work, and the AFDC was dismantled as a pure cash-transfer program out of concerns it did not adequately reward work

As time passed, states added more requirements to the AFDC and with the addition of 6) Policies evolve over more requirements in TANF—passed by a democratic president—participation dropped time, and not steeply. The EITC has also seen more calls for fraud-checks in recent years. Even after necessarily in passage, a basic income policy’s supporters will need to resist pressures to limit progressive ways access

The survival and success of the EITC derives in large-part from its support among 7) Institutionally-connected businesses—who view it as an alternative to minimum-wage increases—and the tax actors matter preparation industry, who support it while lobbying to maintain obstacles to accessing it that only they can resolve for a fee. A basic income policy may need to win over this type of support to succeed, but doing so can risk concessions that limit its benefit

These all point to an overarching lesson: a basic income would represent a break with most existing US social service policies. As a benefit without work requirements or time-limits, a basic income could represent an acknowledgement of the right of the poor to assistance from the state without stigmatizing accusations of dependency, and the inability or inappropriateness of everyone to participate in formal labor markets. Its difference from existing policies represents a point of both hope—of breaking away from racist and exclusionary forms of assistance towards the poor–and trepidation, that a basic income will be unable to break from the system that produced it and reflect the failures of that system.

Chapter 3: Examining Basic income in Stockton and Alaska

Overview Alaska and Stockton are two of the few places in the US with ongoing basic income policies or pilots. Comparing their basic income policies and the economic and policy context in which each emerged can offer useful insight into 1) how each manages their basic income policies, 2) in what context basic income policies emerge, and 3) how other policies could develop.

Context-setting

State of the Stockton and Alaska Economy Despite both having basic income programs, Stockton and Alaska are very different places with different economies.

Stockton Stockton is the 13th largest city in California with a population of 311,178 in 2018.260 Stockton is a diverse city, with a lower percentage of white residents compared to the rest of California (44.7% of residents), a higher percentage of black or African-American residents (11.8% of residents), a higher percentage of Asian residents (21.6% of residents), and a higher percentage of multi-racial residents (10.8% of residents).261 Additionally, forty two percent of Stockton residents identify as Hispanic. Stockton suffered substantially during the 2008 recession.262 The city became insolvent, unemployment exceeded 20%, and public services and benefits were slashed.263 The wealth gap between white households and households of color also increased.264 The city has recovered since the recession, but the city’s economy still falls below California’s overall, and the city is characterized by severe wealth inequality. 265 Median home values in Stockton are about half of the California average, and homeownership rates are also lower at 47.5% compared to 56.4%.266 Stockton’s educational attainment also falls below California overall; 6.5% fewer people have a high school degree or higher, and about half as many people have a college degree.267 About one in five Stockton residents are in poverty, and Stockton’s median income of $51,318 falls below California’s by $20,000.268 Stockton’s unemployment rate of 7.8% also exceeds California’s by about 4%.269

260 “Stockton, California Facts and Fun Information | Visit Stockton.” 261 “U.S. Census Bureau QuickFacts.” 262 “Our VIsion for SEED: A Discussion Paper,” 2. 263 “Our VIsion for SEED: A Discussion Paper,” 2. 264 “Our VIsion for SEED: A Discussion Paper,” 2-3. 265 “Our VIsion for SEED: A Discussion Paper, 2-3” 266 “U.S. Census Bureau QuickFacts.” 267 “U.S. Census Bureau QuickFacts.” 268 “U.S. Census Bureau QuickFacts.” 269 “U.S. Census Bureau QuickFacts.”

Alaska As of 2019, Alaska has a population of 731,545 and was the 49th biggest state.270 Compared to the US overall, Alaska has a much bigger indigenous population (at 15.4% compared to 1.3% nationally) and a smaller black and Latinx population (at 3.8% and 7.2%, compared to 13.4% and 18.3% nationally).271 Alaska also has a higher median household income at $76,715 compared to a national median of $60,293.272 Alaska’s population per square mile is much smaller than the national level, at 1.2 people per square mile compared to 87.4 in the US nationally.273 Within Alaska, large disparities exist in poverty rates between rural and urban areas, and between poverty rates for indigenous peoples and the rest of the population.274 While poverty rates for indigenous peoples living in Anchorage have fallen by 2% since 1990, poverty rates for indigenous people living in rural areas have risen by 3% and living in other urban areas by 6%. Figure 9: Alaska Poverty by Region275

270 “U.S. Census Bureau QuickFacts.” 271 “U.S. Census Bureau QuickFacts.” 272 “U.S. Census Bureau QuickFacts.” 273 “U.S. Census Bureau QuickFacts.” 274 Matthew Berman, “Permanent Fund Dividends and Poverty in Alaska,” 14-16. 275 Matthew Berman, 14.

Figure 10: Poverty by Alaska Native Status276

Stockton’s Budget and Policy Context A basic income policy at a state or local level will need to have funding sources. Devoting resources to a basic income policy requires choosing not to finance other policies. Understanding how Stockton (which does not finance its basic income pilot) allocates their budget can help in identifying the tradeoffs involved in creating a basic income policy, and how places can potentially finance theirs. Additionally, understanding Stockton’s citywide policy goals can contextualize what a permanent basic income would represent (Alaska uses a unique financing structure for its basic income policy, and its budget and policy tradeoffs is discussed in the context of its financing later in this chapter).

Stockton’s Budget The City of Stockton set a $759,613,058 budget for FY 2019-2020. The city projected revenue growth of $6.9 million in 2019 to 2020 due to increases in sale and property taxes.277

276 Matthew Berman, 15. 277This projection has presumably ended up innacurate due to COVID-19.

Figure 11: Stockton City Budget for Fiscal Year 2019-2020278

Of the 35% of projected general fund revenue in FY 2019 to 2020, approximately 89.1% came from tax revenues.279 Sales tax revenue makes up 39.1% of all tax revenue and 35% of general fund revenues; property taxes made up the second biggest source of general fund revenue at 25.61%.280 Stockton is subject to a 1.1% average property tax rate, 9% sales and use tax, and a 6% utility tax. California imposes a minimum sales tax of 7.25%, with 6% going to the state and 1.25% going to cities and counties (0.25% for local transportation, and 1% for local operational funds).281 Counties and cities can charge an additional sales tax on top of the state minimum; San Joaquin County adds a 0.5% tax and Stockton a 1.25% tax, resulting in an overall sales tax rate of 9% for Stockton.282 California exempts services from sales taxes “unless they are an integral part of a taxable transfer of property”.283

278 “City of Stockton FY 2019-20 Budget in Brief,” 2. 279 “City of Stockton FY 2019-20 Budget in Brief,” 2; City of Stockton, “Stockton FY 2019-2020 Adopted Budget,” 48, 67. 280 City of Stockton, 67. 281 “All About California Sales Tax.” 282 “Stockton, CA Sales Tax Rate.” 283 “When Are Services Subject to California Sales Tax.”

Table 11: Projected General Fund Revenue Sources FY 2019-2020284 General Fund Source Revenue Percent of Amount Budget

$82,776,936 35.08% Sales Tax $60,435,045 25.61% Property Taxes $35,017,000 14.84% Utility Users Tax $13,761,667 5.83% Program Revenues $13,663,000 5.79% Franchise Tax $11,941,000 5.06% Business License Tax $10,463,100 4.43% Interfund Reimbursements $4,660,000 1.97% Other Taxes $3,245,909 1.38% Investment Proceeds $235,963,657 100% Total

California’s property tax system is complex, with multiple components. The state imposes a base 1% property tax. Taxes are collected and distributed by the county, to schools, cities, and special districts within the county.285 How the county distributes the 1% base-property tax between these entities is determined by state law. Among local governments, state law dictates that the county allocate the 1% based on the proportion of within-county property taxes the local government received in the 1970s;286 “as a result, local governments that received a large share of property taxes in the 1970s typically receive a relatively large share of revenue from the 1 percent rate under AB 8.”287 The portion of the 1% of property taxes that goes to a local government goes into its general fund, for use as the local government sees fit.288

284 City of Stockton, “Stockton FY 2019-2020 Adopted Budget,” 67. 285 The county also keeps some property taxes for itself. Property tax revenue is also used to pay off debts of California’s (now-dissolved) redevelopment agencies. “Understanding California’s Property Taxes.” 286 In the 1970s, “each local government determined its own property tax rate and property owners paid taxes based on the sum of these rates" “Understanding California’s Property Taxes.” 287 “Understanding California’s Property Taxes.” 288 “Understanding California’s Property Taxes.”

Beyond the 1% rate, local governments have four options for raising additional property taxes based on voter-approval, by either residents or property owners.289 Two—parcel taxes and Mello-Roos taxes—are potentially relevant for financing a local basic income. 290 Using parcel taxes, a local government can tax all or a subset of parcels (typically at a fixed amount per parcel) to fund services with the approval of two-thirds of voters in a place.291 Local governments can use Mello-Roos taxes to fund services, have flexibility over the tax formula (e.g., by square footage or based on the proportion of benefit received by the property owner), and can set the geographic area around which taxes are collected.292 Mello-Roos taxes are voted on by the geographic district.293 If at least 12 voters live in the proposed district, then two- thirds must vote for the taxes to go forward.294 If less than 12 voters live in the proposed district, then the district is voted on by landowners, with each landowner receiving 1 vote per acre and 2/3 of votes required to pass the taxes.295 The following graph illustrates the City’s projections for its general fund, accounting for an expected recession. The city also projected an 11-year period during which expenditures are expected to exceed revenues, based on expected increases in retirement liabilities.296 Out of its general fund, Stockton allocated 2% to economic development and 4% to community services.297

289 “Understanding California’s Property Taxes.” 290 “Understanding California’s Property Taxes.” 291 “Understanding California’s Property Taxes.” 292 “Understanding California’s Property Taxes.” 293 “Understanding California’s Property Taxes.” 294 “Understanding California’s Property Taxes.” 295 “Understanding California’s Property Taxes.” 296 City of Stockton, “Stockton FY 2019-2020 Adopted Budget,” A-25. 297 City of Stockton, B-10.

Figure 12: Stockton General Fund Projections298

In its adopted 2019 to 2020 budget, the City identified tier I and II priorities for the upcoming year.299 Tier I priorities included developing the core downtown; reducing crime; and addressing homelessness. Tier II priorities included developing business incentives and tools for underserved neighborhoods; developing the workforce by working with education partners; engaging businesses on workforce development and job placement (including for individuals with criminal records); and developing an employment pipeline for residents.

Stockton Policy Context Stockton’s Economic Development Strategic Plan acknowledges that achieving its goals of:300

“expand[ing] employment and investment in core local businesses/industries…is highly dependent on the strength of a community’s basic foundational conditions. Thus, the business development components of the Plan are undergirded by a significant focus on quality of life and other foundational initiatives aimed at creating the workforce, business environment, development capacity and overall community image necessary to facilitate effective economic development programming.” In doing so, the plan recognizes as a core economic development goal expanding employment and investment, with communal quality of life a secondary precondition to achieving employment and investment. The plan also recognizes a number of barriers to the

298 City of Stockton, A-25. 299 City of Stockton, B-3 - B-4. 300 “City of Stockton Economic Development Strategic Plan,” 3.

71 attainment of business attraction, including crime, unemployment, and “image problems” from the city’s bankruptcy.301 As strengths, the plan recognizes Stockton’s:302 1) Strategic location in a growth area of California 2) Transport infrastructure 3) Core industry competencies in agriculture, food processing, construction materials, and warehousing/distribution) 4) Academic institutions with industry links 5) Weather/quality of life 6) Diversity 7) Potential for creating a sense of place and attracting regional visitors to the downtown and waterfront 8) Proximity to Silicon Valley and the Bay Area 9) International business development potential The plan lays out a set of initiatives under each group of activities. Core economic development initiatives include: Table 12: Core Economic Development Initiatives in Stockton303 Core Economic Quality of Life Foundational Initiatives Development  Core business  Downtown  Public safety interface: outreach/networking: revitalization: Seeks to Helps implement Marshall Action items in this group promote development in Plan on Crime304, and focus on bolstering downtown through report/market crime industry clusters in incentives, marketing reduction. Stockton, and facilitating public property, and  Streamline city coordination of focusing grants/funding permitting/licensing educational leaders, towards downtown. regulations: Expedite resources, and  Neighborhood permitting through businesses. revitalization: Prioritize checklists of  Business revitalization areas, tries requirements and one- retention/expansion: to recruit retail, facilitates stop/online tools, and Aims to promote and formation of business work with development incubate small improvement districts, community on “business- businesses, and promote markets publicly-owned friendliness’ issues.” career awareness. sites, and develop lien

301 “City of Stockton Economic Development Strategic Plan,” 3. 302 “City of Stockton Economic Development Strategic Plan,” 3-4. 303 “City of Stockton Economic Development Strategic Plan,” 14-24. 304 The Marshall Plan on Crime convened stakeholders on crime in Stockton, reviewed data to develop recommendations for crime reduction in Stockton, and set up recommendations focused on changing behavior and norms and reducing stays in prison.

Core Economic Quality of Life Foundational Initiatives Development  Business attraction: forgiveness program for  Development Includes city branding, residents. capacity/site readiness: coordination with  Focused image and Coordinate with property education and workforce arts/culture programs: database and review development, and Promotes city image and general plan for attracting foreign destinations, develops commercial and industrial investment. arts taskforce, and capacity.  Entrepreneurship and attracts regional and  Infrastructure interface: innovation: Focuses on restaurant development. Align other plans with providing funding and economic development establishing funding plan, and coordinate with sources for port and airport on entrepreneurs, and infrastructure coordinating investments. entrepreneurship programs.  Business development incentives: Develops incentive standards and identifies sources of incentives.

Despite acknowledging the need to address foundational community issues as a precursor to achieving core economic development goals, the success measures—excluding perceptions of crime reduction—are geared around core activities, even when identified as quality of life or foundational activities.305 Outcome measures are also targeted at intermediate targets, not overall goals. For example, quality of life measures new investments in Downtown and visitation and revenue to the city, but not reductions in neighborhood poverty or improvements in neighborhood health.306 The ultimate purpose of economic development is left unsaid. The City’s general plan describes its land use plan, and lays out a series of goals, policies, and actions for the city.307 The city’s land use goals are to:308

305 “City of Stockton Economic Development Strategic Plan,” 7. 306 “City of Stockton Economic Development Strategic Plan,” 7. 307 “Envision Stockton 2040 General Plan,” 1-3. 308 “Envision Stockton 2040 General Plan,” 3-3 – 3-25.

1) Become a regional destination, with policies to encourage retail business and housing development, support expansion of art, cultural, and educational facilities, and improve the city’s visuals. 2) Strengthen downtown Stockton, by developing the downtown as a commerce and entertainment hub, building housing in the downtown, and promoting the downtown as a transit node. 3) Preserve the authenticity of Stockton’s neighborhoods and historic districts, by ensuring the compatibility of new developments with existing, improving the pedestrian and bicycle infrastructure, and expanding park space. 4) Attracting and retaining companies offering high-quality jobs, by encouraging large-scale developments with higher-wage jobs and attracting businesses. 5) Protect resources, by integrating nature into Stockton; protecting natural, cultural, and historic resources; and defining clear city edges. 6) Plan effectively, proactively mitigating development’s impacts, prioritizing development/redevelopment of vacant infill areas, ensuring all neighborhoods can access public facilities and utilities, reduce vehicle miles and use land use designations to minimize origin and destination travel, improve the city’s fiscal health, coordinate with regional agencies and city departments, and increase public participation in planning. The plan also lays out goals for community health.309 The following relate to goals of equitable economic development: 1) Restore disadvantaged communities, ensuring they can access housing, employment, services, and public spaces. Its policies to achieve this goal are to prioritize infrastructure maintenance in underserved areas; develop partnerships to stimulate investment in these neighborhoods; and reduce environmental impacts and risks in disadvantaged communities. 2) Develop a skilled workforce through promoting entrepreneurship and small business expansion, encouraging commercial services useful to neighborhoods in underserved areas, connect youth and adults with skill-building services and resources, and improve access to community education and library services. 3) Affordable housing, by encouraging different types of residential development and supporting the homeless.

309 “Envision Stockton 2040 General Plan,” 6-1 – 6-14.

In reviewing each set of goals across both plans, a clear theme emerges of pursuing economic growth by attracting private investment and promoting job growth. Equity is a concern in pursuing economic growth, but the theory of assisting disadvantaged communities hinges largely on the benefits of attracted private investment and growth flowing to disadvantaged communities. The city’s economic development progress measures reflect this assumption, focused on assessing how well the city attracts investment more than revitalizing neighborhoods. The city’s basic income pilot—and a theoretical permanent policy—represent a different model of equitable development, providing aid directly to people in disadvantaged neighborhoods and putting faith in them to use it to serve their interests.

Basic Income in Stockton and Alaska

Overall Table 13 summarizes major differences between Alaska’s Permanent Fund Dividend and Stockton’s basic income pilot, before delving more into specific differences.

Table 13: Comparison of Stockton and Alaska Basic Income Programs Feature Stockton Alaska

Joint venture between city and Economic Created by state legislature to generate public support Goals and Security Project; created to promote equity for conservative management of oil resources, and history goals, both by providing low-income residents distribute public resources; with declining funding, now assistance and countering narratives about embroiled in political disputes and budget tradeoffs public-assistance recipients City-level, targeted program; provides $500 a State-level, near-universal program; benefits provided Design month annually, with levels based on oil and gas revenue

125 participants; participatory design process; 87% of Alaska residents participate; almost all Eligibility residents randomly mailed in neighborhoods residents eligible, with a few notable exclusions and below the median income; participants participation diverse, and mostly low-income Privately financed by Economic Security Financed by state oil and gas revenue Financing Project Flexible benefit that helps participants meet Reduced poverty in Alaska, especially for rural and Benefits variety of needs, including emergencies; no Alaska native populations with higher poverty rates; and harms major harms, but some participants reported has gone from being unpopular to popular with concerns that others would shame them for Alaskans, who use it for a variety of needs taking the benefit Goals and History

Stockton Stockton mayor Michael Tubbs pursued a basic income program to address poverty in Stockton, and has cited Martin Luther King’s advocacy of the idea in interviews.310 The program defined its goals as to:311

“confront, address, and humanize some of the most pressing and pernicious problems our country faces: poverty, inequality, and widespread financial insecurity. We hope to challenge the entrenched stereotypes and assumptions about the poor, and the working poor, that paralyze our pursuit of more aggressive solutions. We aim to illustrate how widespread and episodic poverty is. In sum, we believe that SEED provides an opportunity to imagine a more fair and inclusive social contract that provides dignity for all.” In its context setting section, a report from the program cited the racial wealth gap within Stockton, rising income inequality, the state of Stockton’s economy, the failings of the social

310 “Mayor Of Stockton, Calif., Discusses Universal Basic Income Program Results.” 311 “Our VIsion for SEED: A Discussion Paper,” 1.

76 safety net, and automation fears as concerns motivating its pilot.312 The paper framed the existing safety net as meeting people’s “essential needs,” whereas “unconditional cash meets people’s most urgent needs,” helping recipients deal with unexpected problems, allowing them to make the most effective decisions for their needs, and providing benefits proactively before situations worsen and costs rise.313 The report contextualized the program within Stockton’s existing set of policies, including a college access initiative, a violence reduction strategy, and workforce development programs.314 Finally, the paper recognized the limits of the program while still articulating a guiding value: recognizing the dignity of people beyond their labor:315

“We recognize that guaranteed income is not a panacea for urban decay or economic immobility. Alone, guaranteed income cannot reverse centuries of government-sponsored marginalization, discrimination, and neglect; it cannot fix schools with low literacy rates, forge trust between law enforcement and citizens, or provide affordable and sustainable housing options for all. However, we believe a guaranteed income can increase stability for working and middle class people and help us to recognize not only the inherent dignity of work but also the inherent dignity of all people.” The pilot includes an independent evaluation, with two goals:316

“First, an independent evaluation ensures that the lessons learned from SEED are accurate, transparent, and community-focused. Second, we hope to generate foundational evidence on the effects of modern-day cash transfer programs in the U.S. so that we may inform forthcoming experiments exploring similar concepts.” The project also sought to “tell the story of SEED,” with narrative goals for the project and its evaluation: 317

“Allow the people experiencing financial insecurity to articulate their obstacles. To achieve this, we will invest in projects that center Stocktonians as the primary storytellers, including people whose stories often go untold. Tell the longitudinal story of how cash impacts lives. We intend to prioritize a small handful of in-depth story engagements that track the demonstration as experienced by a recipient over an extended time-frame. Set the idea of a guaranteed income in a larger framework for a broader vision for a new social contract. We aim to tell the story of SEED as part of the larger story of Stockton, a trailblazing city on the rise” Ultimately, Stockton’s pilot was motivated by goals of equity and inclusion. It sought to both provide income supports for low-income people, help beneficiaries share their experiences, and make a broader argument for recognizing the inherent dignity of people regardless of their participation in the workforce or income levels.

312 “Our VIsion for SEED: A Discussion Paper,” 3. 313 “Our VIsion for SEED: A Discussion Paper,” 4. 314 “Our VIsion for SEED: A Discussion Paper,” 5. 315 “Our VIsion for SEED: A Discussion Paper,” 5. 316 “Our VIsion for SEED: A Discussion Paper,” 9. 317 “Our VIsion for SEED: A Discussion Paper, 9-10”

Alaska Alaska’s basic income program followed a very different trajectory, created in 1980 by the Alaska legislature.318 In 1976, Alaska voters approved an amendment to the state constitution that would set aside at least 25% of Alaska’s annual oil revenues for future public needs in a sovereign wealth fund, the Alaska Permanent Fund.319 The state had recently come into significant oil wealth, and legislators sought to spread out the wealth over time given its limited supply.320 Alaska’s legislature created the dividend program so that the public would support continued oil production, managing the fund in a risk-averse way, and out of an idea that the public had a claim to state resources and should be able to make their own decisions with them.321 With oil prices and production declining in recent years, discussion in Alaska has begun to center around whether to continue providing a dividend or divert the dividend towards state operations.322 In 2015 after declining oil prices created budget difficulties, Alaska’s independent governor323 halved the annual dividend payment from $2,052 under the normal formula to $1,022 so that the state could continue funding public services.324 In Alaska’s 2018 gubernatorial elections, the republican candidate won on a campaign promise to increase dividend payments to $6,700 to make up for the reductions during the prior two years.325 In a bid to pay for the make-up dividend after winning the election, the governor proposed extreme budget cuts, including to public universities, social services, and homeless shelters.326 Constituents responded with a still-ongoing push for a vote to recall the governor, after which he pulled back on some of the proposed cuts and in August 2019, signed a budget passed by the legislature setting an annual dividend payment of $1,600.327 To reduce the cost of the dividend and raise revenue, the governor has floated offering Alaskans the choice to receive

318 “History of the Alaska Permanent Fund”; Matthew Berman, “Permanent Fund Dividends and Poverty in Alaska,” 2. 319 “Alaska’s Constitution,” §15; Matthew Berman, “Permanent Fund Dividends and Poverty in Alaska,” 2- 3. 320 Bradner, “How the PFD Came to Be.” 321 Matthew Berman, “Permanent Fund Dividends and Poverty in Alaska,” 2-3. 322 Matthew Berman, 1. 323 Who ran a joint-campaign in 2014 with the democratic nominee as his running mate. 324 Sundlee, “Alaska’s Universal Basic Income Problem.” 325 Sundlee. 326 “Alaska Governor Reverses Course on Controversial Budget Cuts”; Gonzalez, Stanford Basic Income Lab Interview; Sundlee, “Alaska’s Universal Basic Income Problem.” 327 “Alaska Governor Reverses Course on Controversial Budget Cuts”; “Alaska’s Republican Gov. Mike Dunleavy Faces A Recall Campaign”; “‘The Alaska People Will Fire Him’”; Herz and Anchorage, “After Bruising First Year, New Dunleavy Budget Trades Cuts for Big PFDs and Deficit Spending”; Leseman, “Recall Dunleavy Continues Signature Collection and Prepares for next Steps”; Sundlee, “Alaska’s Universal Basic Income Problem.”

78 a land voucher instead; the voucher could be used in purchases of state land, and would be worth double the value of the dividend payment.328 However, it’s unclear how much revenue the proposal would generate and selling off state land raises a number of other issues, including privatizing natural land—and the environmental concerns associated with doing so—and limits on availability of state land (even though Alaska still owns a large amount of it).329 With the emergence of COVID-19 in March 2020 and steep declines in global oil prices, controversies over dividend funding decisions can be expected to continue.330 As of the time of writing in April 2020, the state legislature had sent a budget to the governor in March 2020 that the governor signed but vetoed specific line-items in, some of which he intended to replace with federal COVID-19 funding.331 The accepted budget included a reduced-dividend payment of $1,000 (from $1,600 in the current budget), but a vetoed transfer of permanent fund earnings reserves to the fund’s principal.332 Vetoed items that would not be replaced by federal COVID- 19 funding included cuts to Medicaid, the University of Alaska, and pre-kindergarten grants.333 The budget also drew down 70% of the cash left in the state savings account, pushing more- challenging budget decisions to next year.334 Alaska’s basic income program emerged out of a desire to manage oil wealth, and distribute public resources to the public. Recent budget conflicts point to tensions embedded in the program’s conception, as a now-expected public benefit built on an increasingly precarious and environmentally destructive revenue source.

Design

Stockton The Stockton Economic Empowerment Demonstration was formed as a collaboration between the Mayor’s Office, the Economic Security Project, and a local nonprofit.335 It started in February, 2019, and was designed to provide 125 Stockton residents $500 per month over 18

328 “Alaska Wants to Sell You Some Land.” 329 “Alaska Wants to Sell You Some Land.” 330 Kitchenman, “Alaska’s Budget Forecast Just Got Even Worse.” 331The legality of him doing so has been questioned. Kitchenman, “Legal Experts, Legislators Push Back on Dunleavy’s Claim That CARES Act Funding Will Fill in Budget Vetoes.” 332 Kitchenman, “Dunleavy Vetoes Budget Items with Plan to Replace Majority of Cuts with Federal Funds.” 333 Kitchenman, “Alaska’s Budget Forecast Just Got Even Worse”; Kitchenman, “Dunleavy Vetoes Budget Items with Plan to Replace Majority of Cuts with Federal Funds.” 334 Kitchenman, “Alaska’s Budget Forecast Just Got Even Worse”; Kitchenman, “Dunleavy Vetoes Budget Items with Plan to Replace Majority of Cuts with Federal Funds.” 335 “Our VIsion for SEED: A Discussion Paper,” 1.

79 months.336 Recipients receive the income on a debit card, and need to report the monthly $500 on their tax returns.337 Researchers sought waivers for beneficiaries in circumstances where their eligibility for other means-tested benefits would be affected by their participation in SEED.338 In circumstances where waivers could not be acquired, researchers sought to explain the tradeoffs to potential recipients so they could make their own choices, and sought to recruit benefit eligibility counselors.339 Any households that declined the benefit would be replaced by another randomly selected household.340 The demonstration also set out two storytelling strategies; one before, and one during the demonstration.341 Storytelling before the demonstration included two approaches:342

1) A Stockton Story Series, led by a professor at San Joaquin Delta College, in which students collected oral histories from residents on their experiences with financial insecurity and how $500 a month would affect them. 2) Help Wanted: Work, Wages, and Worthiness, led by the Stockton Poet Laureate, in which 8 youth and young adults created poetry and spoken word performances “about the association between work and dignity and about how we as a society might expand our notions of work to be more inclusive,” concluding with a public performance.

Storytelling during the demonstration consisted of a storytelling cohort, in which recipients who opted to speak publicly about their experience with the benefit, interacting with the media and community.343 Measured outcomes for the program include financial security, civic engagement, health, and wellness.344 SEED also collected narratives from residents describing their experiences with the program.

336 Martin-West et al., “Pre-Analysis Plan: Stockton Economic Empowerment Demonstration,” 1-2; “SEED Data Dashboard”; Holder, “An Early Peek at What Happens When a City Gives Its Residents Money.” 337 Martin-West et al., “Pre-Analysis Plan: Stockton Economic Empowerment Demonstration,” 1, 3; “Our VIsion for SEED: A Discussion Paper,” 7-8; “SEED Data Dashboard.” 338 Martin-West, Interview with Stacia Martin-West, co-Principal Investigator of the Stockton Economic Empowerment Demonstration; “Our VIsion for SEED: A Discussion Paper,” 7-8; “SEED Data Dashboard.” 339 Martin-West, Interview with Stacia Martin-West, co-Principal Investigator of the Stockton Economic Empowerment Demonstration; “Our VIsion for SEED: A Discussion Paper,” 7-8; “SEED Data Dashboard.” 340 Martin-West, Interview with Stacia Martin-West, co-Principal Investigator of the Stockton Economic Empowerment Demonstration; “Our VIsion for SEED: A Discussion Paper,” 7-8; “SEED Data Dashboard.” 341 “Our VIsion for SEED: A Discussion Paper,” 9-11. 342 “Our VIsion for SEED: A Discussion Paper,” 9-11. 343 “Our VIsion for SEED: A Discussion Paper,” 11. 344 “Our VIsion for SEED: A Discussion Paper,” 1.

Two academics—Dr. Stacia Martin-West and Amy Castro Baker—led recipient selection and evaluation. The program evaluation had four research questions:345

“1. How does a guaranteed income impact financial insecurity and volatility? 2. To what degree will a guaranteed income impact drivers of inequity and social determinants of health? 3. How does guaranteed income unleash potential among recipients and generate agency over one’s future? 4. What do the residents of Stockton think policymakers need to know about guaranteed income and living paycheck to paycheck?” Evaluators used a combination of surveys, in-depth interviews, focus groups, and spending data to answer their questions.346 The evaluation also used a compensated control group of residents who did not receive the benefit but consented to share information about their lives and well-being.347 SEED also planned to host community events, including informational sessions for community members, public roundtables discussing poverty and inequality as well as interrogating the relationship between work and dignity, and a public discussion between the demonstration’s two organizers about the research’s goals and plan.348 The demonstration also put together a community dashboard with data and information on the project.349

Alaska Alaska Permanent Fund Dividend payments are made annually.350 To receive their dividend payment, residents must apply to the Permanent Fund Division in the Department of Revenue. The application period runs from January 1 to March 31.351 An application must be submitted for each person receiving benefits; e.g., “a husband and wife with 3 children will submit a total of 5 applications,” and adults can file and sign their child’s application.352 Applicants can apply through mail, hand-delivery, or online.353 Dividend amounts vary based on annual oil revenues.354 Specifically, the annual payout is calculated based on average Permanent Fund earnings over the previous 5 years.355 Half of

345 “Our VIsion for SEED: A Discussion Paper”, 9. 346 “Our VIsion for SEED: A Discussion Paper,” 8. 347 “Our VIsion for SEED: A Discussion Paper,” 8-9. 348 “Our VIsion for SEED: A Discussion Paper,” 12. 349 “Our VIsion for SEED: A Discussion Paper,” 12; “SEED Data Dashboard.” 350 “Alaska Permanent Fund Dividend Program: Statutes and Regulations,” AS 43.23.055. 351With an exception for individuals who were eligible for hostile fire or imminent danger pay as part of the armed forces. 352 “Filing Period.” 353 “Proof of Filing.” 354 Matthew Berman, “Permanent Fund Dividends and Poverty in Alaska,” 3. 355 Matthew Berman, 3.

Permanent Fund earnings are re-invested, and the other half used for dividends.356 Due to increased population and personal income levels in Alaska, dividend payments in 2016 represented a smaller share of residents’ income than in the 1990s. Applicants can sign up for direct-deposit.357

Figure 13: Permanent Fund Dividend as a Percentage of Per Capita Income358

Part of the dividend payment may be claimed by debt collectors.359 Twenty percent of the payment is guaranteed to payees (unless garnished by a government agency or court); the rest is subject to garnishment, including for child support payments, defaulted education loans, court-ordered fines, and unpaid rent.

356 Matthew Berman, 3. 357 “Direct Deposit Information.” 358 Matthew Berman, “Permanent Fund Dividends and Poverty in Alaska,” 3. 359 “Alaska Permanent Fund Dividend Program: Statutes and Regulations,” AS 43.23.021, AS 43.23.140.

Eligibility and Participants

Stockton SEED used a participatory process to determine its recruitment process, soliciting community and stakeholder perspectives on SEED’s vision.360 From these conversations, three themes emerged: “First, the selection process must be fair. Second, SEED’s recipient pool must be inclusive and representative of all of the city’s residents. Third, we must maximize our opportunity to learn.”361 Based on these goals, SEED used the following eligibility criteria. Recipients must: occupy a residence within Stockton; be at least 18 years old; and be located in a neighborhood with a median income of or below $46,033 (the city’s median household income).362 Recipients were not restricted from participating in the program if they received other benefits.363 The demonstration randomly selected eligible recipients within these neighborhoods, conducting two rounds of mailings to random households within eligible neighborhoods to get a target number of participants, and then randomly selecting participants from among those.364 A report describing the design of the program offered three justifications for its random selection approach:365

“We believe that randomly selecting recipients is fair, as it provides the greatest number of eligible and interested Stocktonians the same probability of being selected. Randomized selection also maximizes our ability to learn and yield objective results. Lastly, by picking individuals from neighborhoods across the city, we make the guaranteed income available to an inclusive and representative portion of the city’s population.” Recipients’ income could exceed the city median; they just needed to live in a neighborhood whose median income fell at or below the median level.366 Dr. Stacia-Martin further said that the researchers expected those most in need to respond rather than those with incomes well above the median level (i.e., a person with a relatively low income would benefit from and likely seek out $500 a month more than someone with a very high income).367 This is consistent with the economics assumption of ordeal mechanisms, that people will only go

360 “Our VIsion for SEED: A Discussion Paper,” 5-6; Martin-West, Interview with Stacia Martin-West, co- Principal Investigator of the Stockton Economic Empowerment Demonstration. 361 “Our VIsion for SEED: A Discussion Paper,” 6. 362 “Our VIsion for SEED: A Discussion Paper,” 6. 363 “Our VIsion for SEED: A Discussion Paper.” 364 Martin-West, Interview with Stacia Martin-West, co-Principal Investigator of the Stockton Economic Empowerment Demonstration; “Our VIsion for SEED: A Discussion Paper,” 6-7. 365 “Our VIsion for SEED: A Discussion Paper,” 6. 366 “Our VIsion for SEED: A Discussion Paper,” 6; Martin-West, Interview with Stacia Martin-West, co- Principal Investigator of the Stockton Economic Empowerment Demonstration. 367 Martin-West, Interview with Stacia Martin-West, co-Principal Investigator of the Stockton Economic Empowerment Demonstration.

83 through the hassle of claiming a benefit if they stand to gain enough to be worth it; however, it does allow that certain people in more precarious states may not have the time or knowledge to deal with the cost of applying.368 SEED also published data on the demographics of its participants. 70% of participants identified as women.369 A plurality of participants were white, and 37% of participants identified as Hispanic, Latinx, or of Spanish descent. Participants had a median monthly income of $1,800 before SEED started, and 43% of recipients were employed full or part-time.370 Figure 14: Profile of SEED Participants371

Prior to the pilot, 48% of participants said that they were “just managing” financially, and 22% said that they were going into debt.372

368 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 16. 369 “SEED Data Dashboard.” 370 “SEED Data Dashboard.” 371 “SEED Data Dashboard.” 372 “SEED Data Dashboard.”

Alaska Unlike Stockton’s pilot targeted to low-income residents, in 2018, 87% of Alaska residents received dividend payments.373 Most Alaskan residents are eligible for the dividend. In addition to being a state resident for the entire calendar year, to meet the residency requirement, a person must have:374  Been in Alaska for at least 185 days in the calendar year (unless their absence is allowed).375  Not claimed residency in another state or country, or received a benefit for doing so in the last calendar year.  Intend to remain an Alaskan resident indefinitely. This is determined by having their primary residence in the state for at least 30 days, or providing evidence of their intent to stay in the state (e.g., evidence they are not claiming benefits outside the state). The following groups can claim the dividend if they meet the other requirements and stayed in Alaska for at least 6 months before leaving, even if they were absent from Alaska for more than 180 days (because their absence is allowable):376  Full-time college, pre-college, or graduate students.  People receiving full-time professional or vocational education that cannot be found in Alaska.377  An active duty member of the armed forces—or their spouse or child378—or a member of the marines.  People receiving medical treatment,379 or providing care for an immediate family member with a life-threatening illness.  Peace corps volunteers380

373 Dividing the number of applications paid by the state population in 2018. “Summary of Dividend Applications & Payments.” 374 “Alaska Permanent Fund Dividend Program: Statutes and Regulations,” AS 43.23.005, AS 43.23.008; “Eligibility Requirements.” 375 Even if the absence was allowed, the applicant must have been physically present in Alaska for at least 3 consecutive days in the last two years. 376 “Alaska Permanent Fund Dividend Program: Statutes and Regulations,” AS 43.23.005, AS 43.23.008. 377 The Alaska Commission on Postsecondary Education determines whether a comparable program is available. 378 Specifically: a minor dependent or disabled dependent. 379 “If the treatment or convalescence is not based on a need for climatic change.” 380 Allowable absences also include settling the estate of a deceased-immediate family member, so long as the absence does not exceed 220 days; serving as a Congressmember; working for the Congress member; accompanying others on allowed absences (e.g., as a parent of a child receiving medical treatment); competing in or training for the Olympics; and participating in a Department of Education or

Dividend applicants must report in their application if they were absent for 90 days or more during the calendar year, or are absent when they file their application. Not all Alaskan residents receive the dividend, however. The following groups are excluded:381  Immigrants other than lawful permanent residents (green card holders), refugees, and asylum claimants; e.g., undocumented immigrants and documented immigrants without green cards  People who during the last year, were convicted of a felony; incarcerated for a felony; incarcerated for a misdemeanor who had previously been convicted of either 1) a felony, or 2) two or more misdemeanors The statute establishing the permanent fund establishes that unless required by federal law, dividend income is excluded when assessing someone’s eligibility for income-contingent benefits. If receipt of the dividend does affect their eligibility for benefits, the Department of Health and Social Services is required to notify them in writing. If someone is absent from the state for more than 180 days for 5 consecutive years, the department assumes they aren’t a state resident anymore.382

Financing

Stockton Stockton’s pilot is financed by the Economic Security Project and other donors.383 The Economic Security Project was co-founded by Chris Hughes—who co-founded Facebook, previously owned The New Republic magazine, led Obama’s digital organizing campaign, and has written a book expressing support for basic income—and Natalie Foster, who founded Peers.org (a support platform for gig economy workers), co-found Rebuild the Dream (“a platform a for people-driven economic change”), and worked in democratic politics and organizing.384 The goal of the Economic Security Project is to “build economic power for all

State student fellowship. The statute also allows extensions of the 180-day requirement for other reasons, with different time limits depending on the reason for the absence. 381 “Alaska Permanent Fund Dividend Program: Statutes and Regulations,” AS 43.23.005, 15 AAC 23.154. 382 Alaska Department of Revenue Permanent Fund Division, “Absence Guidelines.” 383 “Our VIsion for SEED: A Discussion Paper,” 1. 384 Gonzalez, Stanford Basic Income Lab Interview; Ito, “The Paradox of Universal Basic Income”; “Who We Are.”

Americans” through supporting a guaranteed income and anti-monopoly actions.385 To do this, the project:386

“serve[s] as convener, strategist and funder. We disburse grants, identify gaps, develop communications research to inform the movements and coordinate events and convenings to encourage investment and action from others. We aim to support the emerging leaders in the economic justice field and ensure they have the networks, know-how, and money to succeed.” As well as SEED, the project has supported the Magnolia Mother’s Trust basic income pilot, which provided $1,000 a month to 20 black mothers in Jackson, Mississippi.387 Of note, co-founder Chris Hughes has expressed that a permanent basic income policy should be conditioned on work: “Not just because it seems more intuitive for people…but because work is a key source of purpose in our lives.”388

Alaska Alaska’s basic income is funded by the Alaska Permanent Fund, a sovereign wealth fund created through a 1976 constitutional amendment to save and invest at least 25% of state oil revenue for use in the state’s general fund.389 State statute later raised this amount to 50% of revenue from new oil leases.390 A sovereign wealth fund is: “a state-owned investment fund or entity which comprises of pools of money derived from a country's reserves. Reserves are funds set aside for investment to benefit the country's economy and its citizens”.391 Since its creation in 1976, the Permanent Fund’s principal has grown to $55 billion as of September 2016.392 Half of the Permanent Fund’s earnings are reinvested, and the other half made available for dividend payments.393

385 “Who We Are.” 386 “Who We Are.” 387 “Guaranteed Income.” 388 Lapowsky, “Free Money.” 389 “Alaska’s Constitution” Section 15; Matthew Berman, “Permanent Fund Dividends and Poverty in Alaska,” 2. 390 Bradner, “How We Got Here.” 391 Alexandra Twin, “A Sovereign Wealth Fund (SWF) Is Used to Benefit a Country’s Economy.” 392 Matthew Berman, “Permanent Fund Dividends and Poverty in Alaska,” 2. 393 Matthew Berman, 2-3.

Benefits and harms

Stockton Stockton published midpoint data on participants’ use of SEED funding. The graphic below summarizes participants’ use of funds. The most common use of funds was on food, followed by sales and merchandise, countering narratives that the poor will misuse benefits.394

Figure 15: Use of Stockton Basic Income395

However, data may not fully capture program benefits for participants. First, SEED only tracked expenditures through participants’ debit cards. If participants withdrew funds, then SEED could not track their expenditures. Second, expenditures on the debit card may not reflect changes in spending by participants off the debit card. For example, if a participant decided to

394 “SEED Data Dashboard.” 395 “SEED Data Dashboard.”

88 pursue additional education because of SEED, they might use the SEED debit card to meet basic needs, and use their own funds to pay for their education. Interviews with benefit recipients showed that participants used their income to meet a range of needs, some of which may be difficult to capture in aggregated data.396 At the pilot’s midpoint, Stockton’s administrators interviewed a select number of participants on their experiences with the program, complementing their spending data with qualitative descriptions. Of the 14 participants, 12 said that they used their SEED funding to help meet basic needs and utilities (e.g., catching up on bills); however, the depth of need varied between participants. Several recipients described living paycheck to paycheck before SEED, and how the benefit provided a bit of breathing room, including one participant who described facing homelessness without the benefit. Twelve of the fourteen participants also cited psychological improvements from the benefit. Especially for participants in precarious financial situations, the benefit reduced stress and enabled them to relax a little more. Of note, half of the interviewed participants faced emergencies, unexpected costs, or medical situations that the benefit helped them deal with, even if it was unlikely the benefit could cover the full cost. One participant’s car broke down shortly before SEED, and the benefit allowed them to pay for repairs immediately; absent the benefit, they would have delayed the repairs, creating difficulties for the participant and their partner to get to their jobs. The benefit helped another participant pay for treatments when their son got cold sores and had to go to the emergency room twice. A final participant was diagnosed with Thyroid cancer, lost a source of income, and got in a car accident that caused other injuries and limited their ability to work.

396 “SEED Media Bank.”

Figure 16: Benefits Cited in Participant Interviews

Housing mobility or rent Physical health Educational/business investments Reduced bureacracy Work opportunities or fewer hours Other Savings Emergencies or medical Psychological improvement Family time or sharing Basic needs/utilities 0 2 4 6 8 10 12 14 Number of Participants

Six participants also described the simplicity of the benefit’s administration compared to other social service programs as a benefit. Three participants complained of the invasiveness of questions and steps required to access other benefit programs. Another extensively praised the flexibility of the benefit and the trust it showed in residents, without the tight restrictions and risk of becoming ineligible of other social service programs Interviewed SEED participants did not identify problems with the program itself, but around perceptions of the program. Three of the fourteen participants questioned whether the program was fake when they encountered advertisements for it, disbelieving that anyone would provide cash without strings attached. Three participants also either were concerned about how others would perceive the program (i.e., that participants did not deserve or would waste the money, or that others would ask them for money), or had encountered backlash from others in their lives. Additionally, a basic income researcher reported that despite all of the precautions the SEED administrators put in place to inform participants of any benefit tradeoffs and seek waivers, some still dropped out for fear of losing benefits other than a basic income.397

Alaska The Alaska Institute of Social and Economic Research estimates that Alaska’s basic income program reduced state poverty rates by 2.3% between 2011 and 2016; “about 25 percent more people would have fallen below the poverty threshold without the [Permanent Fund Dividend]”.398 However, the poverty-reducing effects of the dividend have declined since

397 Nunez, Interview with Stephen Nunez at Jain Family Institute. 398 Matthew Berman, “Permanent Fund Dividends and Poverty in Alaska,” 17.

2000—when the dividend reduced poverty by 4.2%—due to increasing poverty rates in Alaska and decreasing dividend payment amounts (after adjusting for inflation).399 Figure 17: Poverty Rates with and Without Permanent Fund Dividend400

The dividend was especially effective at reducing poverty in rural Alaska, where poverty rates are highest; “without the PFD, more than one in five rural Alaskans would be pushed below the poverty threshold”.401

399 Matthew Berman, 17. 400 Matthew Berman, 17. 401 Matthew Berman, 20.

Figure 18: Rural Poverty Rates with and Without Permanent Fund Dividend402

The PFD’s benefits for Alaska natives are also especially strong, particularly in rural areas. Additionally, while poverty rates for seniors have declined in Alaska since 1990, without the PFD 33% more Alaskan seniors would fall into poverty, many of whom are Alaska Natives.403 By contrast, poverty rates for children in Alaska have increased from 6.1% in 1990 to 11.3% between 2011 and 2015; without the PFD, they would have increased from 10.5% to 15.6%.404

402 Matthew Berman, 20. 403 Matthew Berman, 24. 404 Matthew Berman, 25.

Figure 19: Alaska Native Poverty Rates by Region, With and Without PFD405

Ultimately, the report’s authors find:406

“the Alaska Permanent Fund Dividend has lifted 15,000 to 25,000 Alaskans out of poverty annually, depending on the size of the dividend and the state of the economy that year…Without the PFD, one-third more Alaska Natives would have seen their income drop below the poverty threshold. The PFD has also played a major role in reducing poverty rates for Alaska children. Based on average rates over the past five years, we estimate that eliminating the PFD would increase the number of children living below the poverty threshold by more than one-third.” Survey data shows that the basic income is popular with Alaskans, and has grown more so overtime.407 In 2017, the Economic Security Project found that 71% of residents supported maintaining the dividend even if it required raising taxes; in 1984, only 29% of residents felt that way.408 The universality of the benefit was attractive to voters:409

“Ninety percent of voters prefer that the money goes to all full-time residents of Alaska. Values of ‘fairness, equality and help for struggling families’ were seen as the sources of deepest support for the Fund”. This is especially notable given that Alaska is a predominantly conservative state; 40% of Alaskans identified as conservative in 2017, compared to 17% as liberal.410

405 Combination of two graphs in Matthew Berman, 21, 22. 406 Matthew Berman, 26. 407 Coren, “Alaska Shows Even Most Conservative States Would Rather Save Basic Income than Cut Taxes.” 408 Coren. 409 Coren. 410 Inc, “Conservatives Greatly Outnumber Liberals in 19 U.S. States.”

The survey found that Alaskans mostly use it for essential purposes and investments: “72% of Alaskans reported saving for emergencies, retirement or education, or spending it to pay off bills, heating, appliances, and car repairs, while about 20% spend it on “extras” such as travel and vacation”.411 The benefit also proved useful for the neediest respondents: “50% of those in more difficult economic straits said the PFD made a major difference in their lives and 79% of respondents said it is an important source of income for people in their community”.412

Chapter 4: Evaluating and Designing Basic Income Policies

Overview Basic income policies involve numerous decisions that affect their efficacy in achieving equity goals. The table below summarizes different decision-points and their implications, before describing each more deeply. Table 14: Design Decisions and their Implications in a Basic Income Program

Decisions Implications

Eligibility: universal or targeted (soft- Cost; program popularity; poverty-reducing effects/program access; targeted or explicit) administrative burdens; stigmatization; purpose (equity or not)

Benefit amount (adequacy or supplement; Cost/budget tradeoffs; poverty-reducing effects interaction with existing income-contingent benefits)

Financing mechanism (options available to Cost; poverty-reducing effects; budget-tradeoffs (e.g., other social states/cities; property, income, sales, services) carbon, value-added tax; reallocation existing funds)

Design process (participation of vulnerable Ease of access/administrative burdens (although state/city systems groups, transparency around benefits/use of tied into); targeting needs; abuse prevention; participation rates ; money) and Administration (who oversees; Administrative burdens; access to benefit/participation rates; cliff effect new agency or existing, technology use)

411 Coren, “Alaska Shows Even Most Conservative States Would Rather Save Basic Income than Cut Taxes.” 412 Coren.

Decisions Implications

Context and supporters (history of racism, Design; stigmatization; durability big versus small city, red vs. blue state, state of budget, advocates for program and opponents)

Discourse to justify programs Stigmatization; political support

Policy Choices and Tradeoffs

Eligibility Decisions over whether to design a universal or targeted benefit involve important tradeoffs. As described in the literature review, the choice of eligibility criteria can be more consequential in determining how much a program reduces poverty than the actual benefit amount.413 Means-tested programs that require eligibility determinations tend to create greater administrative burdens on potential beneficiaries, and the most in-need persons are most likely to lose out on benefits when they need to go through additional hoops.414 Means testing programs can also create psychological and compliance costs for participants, in part due to the US’s long history of class and race-based stigmatization of receiving benefits. Universal programs theoretically reduce the potential for stigmatization by normalizing the receipt of benefits, and broadening the base of the program’s supporters, building in an inefficiency (from the perspective of people concerned with equity) to politically protect it.415 Part of the popularity of Social Security—and the difficulty conservatives encounter in trying to cut it—stems from its near-universal reach to citizens, relative ease of access, and collective understandings of the benefits as earned.416 Since the 1980s, surveys show that Alaska’s dividend has moved from a program citizens would be unwilling to pay taxes for to one that participants express willingness to pay to maintain. More targeted benefits can provide fuel for politically-motivated accusations of fraud, which can lead to more compliance costs—in the form

413 Hartley and Garfinkel, “Income Guarantee Benefits and Financing: Poverty and Distributional Impacts,” 3-5. 414 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 21, 31, 35. 415 Herd and Moynihan; Herd and Moynihan, “TOWARD AN EVIDENCE-BASED APPROACH TO ADMINISTRATIVE BURDEN,” 246; Hoynes and Rothstein, “Universal Basic Income in the United States and Advanced Countries,” 5, 17; Nunez, Interview with Stephen Nunez at Jain Family Institute. 416 Herd and Moynihan, “TOWARD AN EVIDENCE-BASED APPROACH TO ADMINISTRATIVE BURDEN,” 246-247, 259-260, 262

95 of more stringent eligibility and fraud checks—and psychological costs, in the form of stigmatization.417 Surveys support that perceptions of program unpopularity can reduce program uptake.418 Program popularity can also help insulate programs against changes in administrations. Manitoba’s Mincome experiment in the 1970s—which delivered aid to low-income families—and Ontario’s recent basic income pilot both ended after changes in the governing party.419 Even an unwilling party could potentially construct administrative obstacles to the implementation of a basic income.420 If applicants need to submit documentation to report and verify their income levels before claiming a basic income, some eligible participants are unlikely to access the benefit.421 For example, Ontario’s basic income experiment tried to recruit participants with an introductory letter that included lengthy and complex legal language about privacy and afterwards relied on “extensive support and repeated contact to secure tax and banking information from applicants to finalize their eligibility;” only after involving community organizations did the experiment recruit the number of participants it was shooting for.422 However, the popularity of either a universal or targeted program should not be assumed; many people remain attached to the idea that working should be a precondition for receiving benefits, a challenge any program will need to overcome.423 The recent political battles in Alaska and some of the failed examples also demonstrate the fragility of program popularity. The 2018 gubernatorial elections—in which the winning republican candidate promised make-up dividend payments he did not have the power to enact—show how programs can profoundly affect state politics. The failed family assistance plan and cancellation of Finland’s basic income pilot—despite the public popularity of both— suggest that institutionally-connected interests can determine the survival or not of basic income programs. Additionally, universalizing programs involve their own tradeoffs. While administrative costs of universalizing programs may be lower, direct costs can increase. Universalizing programs also risks losing sight of equity goals, and can slide into cutting other social service

417 Herd and Moynihan, 248-250. 418 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 25-26. 419 Bidadanure et al., “Basic Income in Cities,” 20; “Canada’s Cancelled Basic Income Trial Produces Positive Results.” 420 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 33-37. 421 Herd and Moynihan, 24. 422 Gollom, August 3, and 2018, “‘We Just Don’t Have Any Data to Know’”; Mason, “Ontario’s Scrapped Basic-Income Pilot Project Was Actually Deeply Flawed - Macleans.Ca.” 423 Rainwater, Interview with Brooks Rainwater, National League of Cities.

96 programs.424 Alaska’s program offers an interesting example. Alaska’s program isn’t built around explicit equity goals, but achieves important equity outcomes, and the values like fairness that people find in the program offer potential avenues to continue to push for equity. Yet if maintaining Alaska’s program comes to mean cutting schooling or other important social services, the poverty-reduction effects the PFD has produced could be offset partially or entirely. Beneath high-level questions of universality versus targeting benefits lie narrower questions of eligibility. Even “small” exclusions in near-universal programs have important consequences, and narrower eligibility decisions must be made regardless of whether a program is targeted or universal. Alaska’s decision to exclude people sentenced or incarcerated for a felony misses an important population who are especially likely to face income and other barriers after exiting prison.425 The inclusion (or not) of children and the elderly is another important decision.426 If children are eligible for a basic income, places must also decide in what form they receive the money; for example, it could go to their parents, or be set aside in an escrow or baby bond.427 These decisions in-turn affect costs imposed on parents and on the decision to have children; for example, a working paper estimated that the dividend increased fertility rates in Alaska by 13%.428

Benefit Amount Of course, the amount of benefit matters as well, and could offer a round-about way of targeting benefits provided in a universal program. While constrained in recent years by the state legislature, Alaska’s benefit falls substantially below benefits provided through Stockton’s program.429 The poverty-reducing benefits of Alaska’s dividend have also declined over time, as the dividend has come to represent a smaller percentage of residents’ income, producing smaller benefits for poverty reduction. Benefit targeting can also be ‘soft’ (e.g., phasing out benefits at higher income levels or using highly progressive tax schemes versus limiting eligibility to low-income recipients), potentially capturing some of the benefits of establishing a broader base of support while maintaining a focus on equity goals. Universal basic income simulations have modeled phase-

424 Martin-West, Interview with Stacia Martin-West, co-Principal Investigator of the Stockton Economic Empowerment Demonstration. 425 Gonzalez, Stanford Basic Income Lab Interview. 426 Nunez, Interview with Stephen Nunez at Jain Family Institute. 427 Nunez. 428 Matthews, “Americans Have Fewer Kids than They Say They Want. Alaska Has a Solution.” 429 Nunez, Interview with Stephen Nunez at Jain Family Institute.

97 outs for high-income persons. A stakeholder consulting on and researching basic income projects said that many in the field think that in practice, a universal program would either include a phase-out feature or raise income-taxes high enough such that effective transfers to higher-income persons are at or below zero.430 While a phaseout could still give middle and upper-middle class people a benefit equal in amount to those received by low-income people, the thinking is that low-income people benefit more because of decreasing marginal returns on income.431 A person with a monthly income of $500 doubles their pre-tax income by receiving $500 basic income payments; someone making $10,500 a month (about a $125,000 yearly salary) only increases their income by about 5%. The $500 a month also opens up more options for low-income people, helping meet basic needs or make consequential investments (e.g., in further education) that someone with more income is less likely to need the $500 to do.

Financing The choice of financing mechanism remains an important unanswered question for basic incomes’ future at the sub-national level, affecting both program’s viability and their equity implications.432 City-level pilots—including Stockton’s—have been primarily privately financed.433 Traditional state and local financing measures—sales and excise taxes–are highly regressive.434 Poorer people have less to save and consequently consume more of their income compared to the rich, and services—which are used more by the rich—are excluded from sales taxes.435 Excise taxes are based on quantity purchased rather than price, imposing a greater tax burden on purchasers with lower incomes. Progressive income taxes at the city-level may require authority that can only be delegated by the state.436 Taxes that could have potential environmental benefits—like a carbon tax—can also have regressive side-effects.437 The National League of Cities proposed a number of creative financing options— including public-private partnerships, online donations, value-added taxes on luxury goods and gross receipts taxes on companies, social impact bonds, and environmental fees—but it remains to be seen how emergent some will be in general, and whether they could be purposed

430 Nunez. 431 Nunez. 432 Nunez. 433 Nunez; Rainwater, Interview with Brooks Rainwater, National League of Cities; Black, Interview with Rachel Black, administrator of Magnolia Mother’s Trust. 434 Saez and Zucman, The Triumph of Injustice, 10, 16-18, 190. 435 Saez and Zucman, 16-18. 436 Rainwater, Interview with Brooks Rainwater, National League of Cities. 437 Hartley and Garfinkel, “Income Guarantee Benefits and Financing: Poverty and Distributional Impacts., 5-6”

98 towards a basic income.438 It can also be more challenging for state and local governments to apply progressive taxes compared to the federal government, both because of the greater capacity of the federal government and the wealthy’s ability to escape taxation by moving to places with lower taxes.439 If places increase sales or excise taxes to fund a basic income, it could reduce the benefits of a basic income for poorer residents or even widen existing inequality.440 For example, a flat universal basic income funded exclusively by sales tax increases (although quite unlikely in practice) would increase the amount low-income residents pay in sales taxes, while providing an equivalent benefit to both high and low-income residents. Finally, the inability to borrow extensively–and the constitutional need to meet balanced budget requirements in some states—could limit cities’ and states’ abilities to guarantee a basic income. Recessions—like the one we’re currently experiencing—or other financial pressures could lead cities and states to cut back on their basic incomes, which could disrupt their ability to make financial plans. The options available to states and localities are also place-specific. Tax-levels vary widely between states, and some places have limited control over their funding options. In thinking of potential options for a city like Stockton to collect more revenue for a permanent basic income (without resorting to regressive sales or excise taxes), Stockton could consider parcel taxes or Mello-Roos taxes. Parcel taxes could allow Stockton to collect revenue from across the city for a basic income, offering the advantage of a broader financing base and the potential for residents with higher property values to cross-subsidize the income of residents with low property values or no property. The disadvantages of a parcel tax are that it could be harder to get 2/3 of voters to vote to raise their taxes, especially if the benefit is targeted. Mello- Roos taxes offer the advantage of drawing a geographic boundary for the basic income that might be more likely to approve a targeted income while still including enough high-value properties to fund the income. They could also be useful in gentrifying areas, where property values have begun to increase but many long-time residents remain. However, it may be administratively difficult or complicated to operate one or multiple basic incomes in different

438 Bidadanure et al., “Basic Income in Cities,” 18-19 439 How limited states and cities actually are in their ability to tax their wealthy residents and corporations is a matter of debate (e.g., whether California’s income tax hikes caused wealthy residents to leave, and whether that would matter given continued in-migration of the wealthy and revenue gains, remain contested: https://chicago.suntimes.com/2020/3/1/21158481/fact-check-graduated-income-tax-rate- california-quentin-fulks). However, it is clear that many cities and states use tax abatements and incentives to try to attract wealthy companies and residents. 440 In relative terms, even if absolute deprivation falls for a city’s poorer residents.

99 parts of the city, and it may be challenging to balance including enough high-value properties to provide an adequate basic income with getting the basic income passed. Alaska’s sovereign wealth fund avoids the problem of regressive taxes, allows the distribution of fairly high benefits to most of its residents, and helps build in support for the program. The state’s oil resources are a public good that many Alaskans feel a stake in, and the dividend makes that stake manifest. However, the fund creates a different set of hurdles; it ties the future of a program with progressive benefits to an environmentally damaging and declining source of revenue in oil extraction. In doing so, it also helps build support for an environmentally damaging form of wealth. Recent budget crises in Alaska and discussions over whether to cut the benefit, or cut other social services raise questions about the durability of Alaska’s program, despite its popularity. Sherman County, Oregon offers an interesting counter-example, distributing $590 in wind-energy dividends to its 1,800 residents annually and using the remainder to finance the construction of public facilities.441 But Sherman County has a small population, and—under places’ current approach to economic development—it’s unclear whether another state or bigger locality could emulate Alaska’s situation in the 1970s of coming upon a public revenue source that generates enough extra-revenue to finance a basic income.442

Administration and Design Process Technology can also reduce or enable administrative burdens.443 Putting information online can help expand the number of people who can find out about the program, but if information is exclusively available online it may miss people who are less technologically literate. Autoenrollment and default structures reduce administrative burdens on recipients, changing cognitive assumptions about whether benefits are earned and removing the steps required to access benefits.444 Presumptive eligibility can also increase participation in targeted programs, “allowing those who appear to be eligible to participate pending full documentation”.445 Ontario planned on

441 Gonzalez, Stanford Basic Income Lab Interview; “Sherman County, Oregon Has Used Wind Power to Provide a $590 Dividend per Household Every Year since 2002.” 442 Chodos, “Email Exchange on Local Basic Income,” April 28, 2020. 443 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 21-22. 444 Herd and Moynihan; Herd and Moynihan, “TOWARD AN EVIDENCE-BASED APPROACH TO ADMINISTRATIVE BURDEN,” 248-249, 258-259. 445 Herd and Moynihan, “TOWARD AN EVIDENCE-BASED APPROACH TO ADMINISTRATIVE BURDEN,” 260.

100 using tax-returns to identify beneficiaries if it was rolled out beyond the pilot stage.446 Requiring participants to opt-into benefits puts learning costs on participants, but localities may not yet have systems in place to identify residents and distribute benefits without opting-in.447 Several participants interviewed in the SEED program reported initial skepticism about the concept of getting no-string-attached money when they received the mailer. Distribution mechanisms require further thought as well; while it might be preferable to distribute benefits monthly rather than as a lump sum, doing so may require setting up new distribution mechanisms or coordinating with existing ones.448 Pilots so far have mostly avoided these questions by using private contractors to distribute benefits (even pilots implemented in collaboration with city governments), which one researcher described as a “huge, gaping hole in [basic income] research efforts”.449 Implementing any form of universal basic income will come with new administrative responsibilities, which need to be fit into an existing state or local government system. As a second-order consideration, cities and states should think about potentially predatory industries that could emerge around the distribution of basic income. For example, one could easily imagine the tax-refund anticipation loan industry offering a similar product for basic incomes, with similarly high interest rates and expensive fees.450 Stockton’s experience should be instructive as a positive example of taking efforts to decrease learning costs by involving community groups and organizations in advertising the SEED program, and using television ads to inform residents about the SEED program. This type of community involvement has been shown to increase participation in other social service programs.451 Additionally, community involvement can act as pro-active and ongoing regulatory check on administrative burdens, making sure that participants’ experience with the program is as seamless as possible.452 As described by several SEED participants in interviews, the low barriers to access the program reduced the psychological costs associated with going through the application process. Participants positively compared the ease of accessing SEED benefits with other social services that subjected applicants to invasive questions, consistent with evidence that administratively

446 Paling and Tencer, “These Towns Are Trying Out A Basic-Income Scheme And It’s Already Changing Lives.” 447 Nunez, Interview with Stephen Nunez at Jain Family Institute. 448 Nunez. 449 Nunez. 450 “Tax Refund Loans: Instant Trouble | Center for Responsible Lending.” 451 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 23-24 452 Herd and Moynihan, “TOWARD AN EVIDENCE-BASED APPROACH TO ADMINISTRATIVE BURDEN,” 263

101 burdensome processes can increase stress. Nonetheless, some participants described a different psychological cost, of facing potential sanctions from other residents for accepting the benefits. Even a progressive city with a fully-supportive mayor cannot fully eradicate a culture that stigmatizes need and the receipt of aid from the state. Stockton’s public data dashboard and participant interviews represent another model in program-design for basic income programs. Both reinforce accountability mechanisms to expose the types of administrative burdens that participants could experience, and assess the benefits or drawbacks of the program for participants.453 It’s important that accountability mechanisms also exist to identify discriminatory applications of administrative burdens. For example, in a study of Belgian nursing homes, requests for information from people with Arab- sounding names were 20% less likely to be answered than people with Flemish names.454 TANF frontline workers have administered the program in racially discriminatory ways, drawing from biased stereotypes or behavioral judgments when interacting with applicants of color.455

Context and supporters A basic income at any scale must also fit within the existing, work-centric national-level framework of social services, which poses its own challenges. Losing eligibility for or receiving reduced benefits from means-tested programs would reduce benefits provided to low-income beneficiaries of a basic income. If people who receive a basic income are unaware that their benefit should be counted as income, they could face penalties that entirely undercut the benefits of participating. Most pilots so far have sought waivers from means-testing requirements for people receiving means-tested benefits, screened-out people who would risk losing other forms of benefits by participating, or—like Stockton—made sure that beneficiaries whose eligibility would be reduced were aware of the tradeoffs involved in accepting a basic income.456 Some places have considered providing benefits as a gift rather than income, so that recipients taxes do not increase as a consequence of receiving the benefit.457 While ethically appropriate and understandable, the need to acquire waivers or screen-out people who would lose their benefits should cause some caution in interpreting pilot-data on the benefits of basic income for low-income people, since participants in these pilots will explicitly not need to face

453 Herd and Moynihan, 241, 247-249, 255-257. 454 Herd and Moynihan, 266. 455 Mannix and Freedman, “TANF and Racial Justice,” 225. 456 Gonzalez, Stanford Basic Income Lab Interview; Nunez, Interview with Stephen Nunez at Jain Family Institute. 457 Gonzalez, Stanford Basic Income Lab Interview.

102 the tradeoffs many low-income people would need to in a permanent basic income program.458 With that said, that Alaska’s program has reduced poverty significantly even though participants count dividend payments as income suggests that the program can still be beneficial. Localities must also think about the social context in which a basic income is implemented. Beyond whether a basic income is targeted or universal, they are implemented in communities with particular histories of racial discrimination and exclusion and existing inequities in power structures. A basic income researcher said that research questions in pilots so far have given inadequate consideration to these dynamics.459 Pilots so far have had difficulty recruiting people from vulnerable communities, both out of skepticism around the concept of no- strings attached money and a history of negative interactions with government.460 If people do not see themselves represented in conversations around guaranteed income, it could limit their participation in a permanent program, and reduce basic income’s potential for achieving equity goals.461 As described by one basic income researcher, conversations around basic income in the US have “emerged out of automation [concerns] and current changes in the economy, rather than meeting the needs of people who the economy has never really worked for”.462 Whether in a targeted or universal program, it can be good to adopt the practice of Stockton’s pilot and Magnolia Mother’s Trust in engaging the most vulnerable communities in determining what their needs are, and what metrics they want to assess the success of the basic income.463 The network of likely supporters and opponents of a basic income will likely determine the program’s success and influence its form, and deserves consideration as well. Alaska’s basic income has support from the state’s oil industry, was designed in-part to maintain public support for the oil industry, and has gained public support as people received the benefit. The Family Assistance Plan failed in-part due to opposition from Southern Democrats who opposed the program for boosting black workers’ bargaining power.464 The EITC has survived and been expanded as businesses employing low-income workers recognized it as a wage-subsidy that they did not have to pay for, and as the tax-preparation industry realized an additional source of revenue.465 It also took time for industry to realize these benefits. Social Security became popular as Americans received it and began to recognize the benefit, and had to encounter few

458 Nunez, Interview with Stephen Nunez at Jain Family Institute. 459 Gonzalez, Stanford Basic Income Lab Interview. 460 Nunez, Interview with Stephen Nunez at Jain Family Institute. 461 Black, Interview with Rachel Black, administrator of Magnolia Mother’s Trust. 462 Black. 463 Black. 464 Herd and Moynihan, “THE EARNED INCOME TAX CREDIT,” 198-200. 465 Herd and Moynihan, “THE EARNED INCOME TAX CREDIT,” 202-207.

103 administrative burdens to claim it.466 The program also reduced compliance costs for employers by soliciting their participation and simplifying forms they needed to fill out, and advertised the program to the public in its early years to build support and reduce learning costs to participate.467 Outreach was coordinated and widespread; different divisions directed outreach to the media, labor advocates, and businesses, staff spoke on the radio, and the organization created field offices around the country.468 However, even Social Security excluded two-thirds of black workers by cutting out agricultural and domestic workers in its initial design, motivated by racism.469

Discourse Finally, the discourse used to support proposals can matter. Expressing support for a basic income as a way to “streamline” the existing system of social supports risks undermining necessary, non-cash forms of social supports. It’s not unreasonable to think something like SNAP benefits would be better delivered as an unconditional cash transfer, but if the same amount of benefits are re-directed to everyone instead of just low-income people, the benefits for low-income people would be reduced. It’s also more unlikely that funding for schools or workforce training would have more consequence as a cash transfer. Policies can influence the civic identities of those who receive them, in potentially positive ways.470 A basic income study in Canada found that the existence of the program changed how residents viewed the provision of welfare. It’s possible that a targeted policy argued in the language of officials like Stockton’s mayor could help change the conversation around the state’s obligation to its citizens; it’s also possible that—like in Alaska—offering a broad-based program could build a broader base of support for an equity program.

Benefit Simulation in Stockton To give weight to what tradeoffs a basic income policy would entail at the city level, the table below describes quick simulations of the cost of a theoretical permanent basic income program in Stockton under different parameters. This cost-projection does not meet rigorous standards by any means, but is meant to give a quick sense of the magnitude of a basic income’s costs. The eligible population for the basic income are Stockton residents between 18

466 Herd and Moynihan, “SOCIAL SECURITY,” 215-218, 221-223, 226-232. 467 Herd and Moynihan, 226-232. 468 Herd and Moynihan, 229-232. 469 Herd and Moynihan, 224-225. 470 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 29-30.

104 and 65, based on Census data.471 Costs are expressed as a percentage of Stockton’s FY2019- 20 budget of $759,613,058. Assumed administrative costs are 0.6%, identical to Alaska’s.472 Among other differences from a real program, this simulation does not feature a phaseout feature, instead using a strict income cutoff. Table 15: Cost Projections for a Basic Income in Stockton Benefit Level Eligibility473 Cost (as percent of Stockton’s budget)

Residents with incomes below 142% $500 a month $165,000 Residents in the bottom 20% of 29.8% $500 a month income Residents with incomes below 28% $100 a month $165,000 Resident in the bottom 20% of 5.97% $100 a month income

These simulations are somewhat sobering for the prospects of a generous basic income at the city level. Even a targeted benefit on the low-end would consume a significant portion of the city’s budget, demanding a re-prioritization of existing city resources or new, substantial funding sources.

Conclusion and Design Considerations Whether a universal basic income could Trojan Horse equity outcomes in language more palatable to a public fixated on only giving aid to the “deserving” poor; or would trade-off with benefit-levels to the point where they only make a minimal difference in the lives of low- income residents and elide necessary conversations about the state and society’s obligation to redress racial and class inequalities that each474 bear responsibility for, is likely a matter of

471 “U.S. Census Bureau QuickFacts.” 472 “Permanent Fund Dividend Division: Annual Report 2015,” 6. There may be good reason to think administrative costs would be higher at the city level, but for the purposes of this simulation, increasing administrative costs to 2% did not substantially affect the cost results. 473 “The Demographic Statistical Atlas of the United States - Statistical Atlas.” 474 In using “each” here to refer to societal complicity for racial and economic inequalities and its concomitant responsibility to redress them, I mean to specifically describe dominant groups within society (i.e., white individuals, companies that profit off of exploitation, and dominant economic groups), and do not mean to universalize complicity to socially marginalized groups that have and continue to suffer from racist and classist structures.

105 specific policy choices, local context, and debate. A near-universal basic income, funded using progressive taxes or other financing measures, with benefit levels adequate to end poverty for low-income individuals, whose implementation does not trade-off with other necessary social services, and designed with low administrative hurdles, could be fairly described as advancing social equity and the goals of the Just City. Conversely, a benefit targeted to low-income residents, with complex income-verification and work-activity requirements, financed through regressive taxes, implemented with cutbacks to school funding, and providing time-limited benefits could be fairly critiqued as working against equity goals. Place also matters.475 Stockton’s Mayor explicitly justified its program in terms of racial equity and economic justice, and Newark’s mayor has proposed a basic income on similar grounds. Both are liberal cities, and in liberal or purple states. Alaska is a primarily conservative state, and the relative-universality of its oil and gas dividend likely explains some of the support for the program. The capacity of the place in question affects the degree of burden placed on residents; a program with eligibility or documentation checks can be less difficult for residents if the government can process applications easily.476 Place is also inseparable from financing. It’s more feasible for a large, in-demand city with substantial revenues to finance a permanent basic income; it could be harder for smaller, less well-off cities (e.g., Newark), or even large cities facing substantial debt and budgetary challenges (e.g., Chicago).477 While it’s important to acknowledge the limitations of a basic income, similar proposals under consideration are not immune from difficult design decisions. A job guarantee still requires substantial negotiation with unions and could involve a heavier lift, as well as decisions over adequate payment amounts and how to support people who are unable to work 478. The logistical challenges of a basic income raise questions about the purpose of basic income pilots.479 Are pilots test-runs for permanent local policies? Proof of concept for a national-level policy? Or politically motivated, to raise the profile of participating cities and mayors? One researcher and designer of a basic income pilot said that the field is now trying to determine what features of a basic income places should try to replicate; the policy itself (i.e., giving people cash), or features of a basic income policy that could improve other policies.480

475The National League of Cities has listed a number of useful considerations that will vary by place, including the local form of governance and distribution of authority within government. Bidadanure et al., “Basic Income in Cities,” 20-29. 476 Herd and Moynihan, “TOWARD AN EVIDENCE-BASED APPROACH TO ADMINISTRATIVE BURDEN,” 246, 257, 262-264. 477 Nunez, Interview with Stephen Nunez at Jain Family Institute. 478 Gonzalez, Stanford Basic Income Lab Interview. 479 Nunez, Interview with Stephen Nunez at Jain Family Institute. 480 Black, Interview with Rachel Black, administrator of Magnolia Mother’s Trust.

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The latter could include de-conditioning benefits, providing benefits more frequently, and providing cash vs. in-kind benefits.481 Pilots help in envisioning a basic income as part of a cohesive equitable development strategy, and counter narratives of how the poor use public assistance.482 The same researcher thought that implementation would need to be at the federal level, describing evidence of federalism showing that many states tend to implement policies in a regressive way.483 A different researcher thought that cities and states could potentially use a basic income to fill in gaps in the existing social welfare system, and finance it by trying to identify and eliminate programs that primarily benefit higher-income people (e.g., because the Child Tax Credit is nonrefundable and therefore cannot be claimed by people without tax liabilities high enough to receive the benefit, it tends to benefit middle to higher-income people).484 Ultimately, expressions of unquestioned support or hostility toward basic income risk diverting attention from the specifics of the proposals under consideration; it’s these specifics which should guide our assessment of whether a basic income policy truly advances the vision of the Just City, or retrenches existing systems of inequality. Administrative burdens are characterized by their opacity, controllability, and (facial) neutrality; two programs providing $500 a month could create vastly different experiences for potential beneficiaries depending on how difficult they make it to access that $500.485 Table 16 summarizes some considerations in designing basic income plans to advance equity for each feature described above. Questions in this table overlap with and should complement the considerations for designing basic-income pilots identified by the Stanford Basic Income Lab and National League of Cities in their summary report on Basic Income in Cities.486 These should be treated with high caution; as described, decisions are interrelated and shaped by context. However, hopefully they can provide some guideposts for designing permanent basic income programs.

481 Black. 482 Black. 483 Black. 484The Additional Child Tax Credit can be claimed by people whosecredit exceeds their tax liabilities, but there are limits on the amount of benefits. 485 Herd and Moynihan, “UNDERSTANDING ADMINISTRATIVE BURDEN,” 36-37. 486 Bidadanure et al., “Basic Income in Cities,” 20-29.

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Table 16: Considerations in Designing a Basic Income Policy Feature Considerations

Universal: is a universal program necessary to build support for the program (affected by politics and Eligibility context)? Are benefit levels adequate to achieve equity goals for low-income residents? Do low- income or high-income residents bear responsibility for the program cost? Can the city/state afford it? Is equity still the goal of the program? Targeted: Can the city/state attract support for a targeted program? Can the city/state soft-target the program to make targeting less explicit? What advocates can the city/state find for a targeted program? How will the city/state counter stigmatization of program participants (e.g., as Stockton has tried)? How does the city/state limit participation to the poor without imposing administrative burdens on them (e.g., autoenrollment, requesting/using tax records)? Both: Are the elderly and children included?

What benefit level is sufficient to make a difference in the lives of the poor? What can the city/state Benefit afford without cutting other programs that benefit the poor? If low-income people participate, how can amount the city/state minimize threats to their other benefits (e.g., through waivers or making sure people are aware of the tradeoffs)?

Are progressive financing mechanisms available to the state/city (property or income taxes)? If the Financing program must be funded using regressive financing (e.g., through sales taxes), do low-income mechanism residents primarily benefit (e.g., as part of a targeted benefit)? How does the state/city currently spend its money on programs that do not primarily benefit low-income residents (e.g., many tax incentives), and could that money be redirected to a basic income? Are there any creative financing options available (e.g., public-private partnerships, public revenue opportunities), and what tradeoffs do those entail? What will happen to the program in times of economic hardship?

Were marginalized groups and their advocates involved in the design of the program? How did the Design city/state make people aware of the program, and is assistance available to help participants? Who process and oversees the program (e.g., new agencies or existing)? What community accountability mechanisms administration exist? What do eligible people need to do to claim benefits? How are benefits distributed and how often? Will companies try to profit off of the program by preying on the poor?

How will institutional racism influence the design or administration of the program, and how can its Context and effects be countered? How will the place’s politics and statutes/regulations influence the program? supporters How will the program insulate itself against political changes? Will participants be harmed if the program is cancelled? Does the city/state have the capacity to support the program? Who is likely to

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Feature Considerations

or might support the program (e.g., Silicon Valley, community groups, labor, potentially businesses employing low-wage workers), what are their interests in the program, and how might their support compromise the goals of the program? How can the state/city build public and stakeholder support for the program? Who is likely to oppose the program, how, and how can their influence be minimized?

What are the program’s goals? Do low-income people see themselves represented in the program? Discourse to What opportunities are there for low-income people to share their experiences in the program? How justify will the language used to promote the program attract or repel support, or counter false narratives programs about the program (e.g., racist attacks, ideas that you should work to receive benefits)? Chapter 5: Conclusions Prior to COVID, interest in basic income pilots remained high, and more cities were working on designing basic income pilots.487 With its onset, interest has only risen.488 Two interviewed stakeholders provided a useful framing of the questions facing those researching and implementing basic income programs: 1. “What is [basic income] the solution to, or answer for?”489 2. “What other changes to the environment are necessary in the first place for a basic income program to be effective, and not harmful?”490. These could be as simple as passing legislation, or as complex as structural changes to housing or labor markets.491 Researchers asked to provide a timeframe for a permanent basic income varied in their estimates. Two expressed optimism about its prospects, with one saying that they might expect a more permanent program within 5 years.492 Another expressed uncertainty, saying that it was unclear whether recent interest in basic income programs will have staying power or are a “shiny object”.493 Ultimately, this thesis has shown that basic income programs can support equity, but big questions remain in moving from pilots to permanent programs. The literature review reveals that the theoretical equity benefits of basic income are extensive, and that pilots so far have

487 Hartley, Interview with Rob Hartley at the Columbia School of Social Work; Nunez, Interview with Stephen Nunez at Jain Family Institute. 488 Henley, “Finnish Basic Income Pilot Improved Wellbeing, Study Finds.” 489 Black, Interview with Rachel Black, administrator of Magnolia Mother’s Trust. 490 Nunez, Interview with Stephen Nunez at Jain Family Institute. 491 Nunez. 492 Rainwater, Interview with Brooks Rainwater, National League of Cities. These interviews were conducted before the onset of COVID-19, which may have impacted their estimates. 493 Black, Interview with Rachel Black, administrator of Magnolia Mother’s Trust.

109 produced wide-ranging benefits for participants. However, questions remain about program cost, and whether an actualized basic income policy would involve too many tradeoffs to be worthwhile. A deeper dive into four failed basic income proposals and pilots demonstrates the risk of changing politics to a basic income, the influence of institutionally-connected actors in blocking basic income programs, and that class and racially-driven critiques around a basic income’s lack of work incentives can be pervasive. Reviewing the existing federal benefits system and three policies within it shows that the current benefits and transfer system is complex, laden with administrative burdens, and in many ways regressive; that a basic income will likely need to contend continuously with pressures for administrative requirements and work-incentives, and that potential participants could face losses of other means-tested benefits; and that a basic income represents a break from existing systems in ways promising for what it represents and could effect, but concerning for its survival. Examining Stockton and Alaska’s basic income programs show two programs with different goals, but largely equitable effects. Stockton provides a bigger benefit to 125 predominantly low-income households, frames its program in explicit equity goals, used a participatory design process, and actively works to promote the program through community events and sharing participants’ stories. Its broader economic development policies are largely directed at attracting private investment and jobs as strategies to benefit disadvantaged neighborhoods; basic income represents a more direct way of aiding the same groups. Participants use the benefit to meet varied needs in their lives—ranging from essential goods and services to dealing with unexpected emergencies—and appreciate the lack of administrative burdens compared to other programs. Stockton’s program is privately financed by an organization co-founded by a former Facebook executive, eliding questions about what a permanent program would look like. By contrast, Alaska provides an annual benefit based on state oil and gas revenue to 87% of its residents. It was created to distribute public resources back to the public and build public support for conservative management of oil and gas resources; declines in oil and gas revenue have put the future of the dividend in conflict, sparked enormous political battles, and put the dividend in tension with other state social services. Despite its lack of explicit equity goals, Alaska’s program has reduced poverty throughout the state, especially for more-vulnerable rural and Alaska Native populations. That it was able to achieve this despite the dividend being counted as regular income (and therefore potentially reducing other benefits received by low-income residents) speaks to basic income’s equity potential. The program has also become popular among the public, who view it as something they are entitled to and in terms of values of fairness.

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Reviewing this collection of evidence to think about what future basic income programs might look like at the city or state level reveals the interconnectedness of each design decision, and the high-degree of uncertainty still surrounding them. A rough simulation of a basic income’s cost in Stockton demonstrates the difficulty cities and states may face in financing a basic income. Answering whether basic income could advance equity is not a black and white answer, but a function of these design decisions. The most serious unanswered questions for a permanent program remain about program financing, political support and durability, and administration. Returning to the theoretical frameworks set out in the first chapter to evaluate basic income, we find that: 1) Basic income can advance equity goals and reduce administrative burdens, but the details determine success. Both Stockton and Alaska’s programs have achieved equity goals, even though only Stockton’s has explicit equity goals as a focus. However, Alaska’s program now faces a crisis that can undercut its effects even if the program survives (e.g., by surviving through education and Medicaid funding cuts), due to its reliance on a limited, declining, and environmentally destructive revenue source. Basic income policies should be judged based on their specific design decisions, as those will determine their equity effects. 2) Basic income can envision a new role for the state in economic development – as a recognition of the inherent dignity of residents, not just entrepreneurialism or conditioned on work. Even many of Stockton’s city-level equity policies are motivated by trying to attract private investment. These measures are not incapable of producing equity benefits, but they have as a general strategy they have failed to distribute benefits equitably in many cities and states across the US. A basic income policy can imagine a new role for a city or state in providing direct benefits to residents, without conditioning their receipt on meeting benchmarks of worthiness. Despite the degree of uncertainty surrounding basic income, further work can be done to build support and answer currently unanswered questions. We conclude with the following recommendations, which can hopefully provide some help to those interested in advancing equity through basic income.

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Table 17: Recommendations for Designers of Basic Income Pilots; Cities and States; and Academics, Researchers, and Advocates Designers of Basic Income Pilots Cities and States Academics, Researchers, and Advocates

1) Try to get more at unanswered 1) Try to incorporate more features of 1) Try to get more at unanswered questions about basic income. basic income in existing policies. questions about basic income. Extensive data now exists on the This recommendation operates at Extensive data now exists on the benefits of basic income for two levels. First, to the extent benefits of basic income for participants, but serious questions existing social service programs participants, but serious questions about the design of a permanent are characterized by about the design of a permanent policy—including how it would be administrative burdens, cities and policy—including how it would be financed, and what effects a states should work to minimize financed, and what effects a universal program would have— them by incorporating features of universal program would have— remain unanswered. Pilots should basic income programs (e.g., remain unanswered. Pilots should try to get more at these questions. direct provision of benefits, try to get more at these questions. 2) Follow Stockton’s example in unconditionality). Second, cities 2) Continue advocacy to identify design and advocacy: Even if and states can think more critically supporters for basic income. The basic income pilots cannot about how directly their equity and success or failure of existing address unanswered questions, economic development policies programs have been in-large part they can set templates for future benefit low-income residents. determined by the influence of design, counter stereotypes about Many city and state policies to this institutionally-connected actors. benefit recipients, and promote end provide benefits very indirectly Advocates should try to map basic income as an equity tool. to residents, to the point where it’s potential advocates before Stockton’s participatory design unclear whether the most permanent policies are proposed, process, transparent data and vulnerable residents benefit at all. and work to ensure their interests sharing of its participants Cities and states should are aligned with equity goals. narratives, and extensive investigate how their policies could advocacy efforts should represent provide benefits more directly to a model for other interested cities low-income residents and states. 2) Think more seriously about what 3) Minimize risks to participants: The basic income programs might look cancellation of Ontario’s basic like, not just pilots. The benefit of income program and the additional pilots becomes less

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Designers of Basic Income Pilots Cities and States Academics, Researchers, and Advocates

psychological costs it imposed on clear as more occur. Cities and participants should represent a states should give more serious note of caution to pilot consideration to what policies designers. Pilots must be might look like, and how they cognizant of the risks of could actualize those policies. cancellation or to participants’ means-tested benefits, and work to minimize those risks.

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