STREET SMART ECONOMICS | A team of researchers proposes the IRS make monthly payments to lower-income families to move every household above the poverty line
W e could eradicate poverty and raise the incomes of U.S. families in the bottom half of the income distribution by providing a guaranteed income through the tax system, according to a proposal from a team lead by Naomi Zewde and Darrick Hamilton. The impact would be enormous, dramatically reducing homelessness, hunger, killer stress and despair, as well as racial disparities and the severe economic insecurity of single-mother households.
The reduction in child poverty alone would be transformative. America stands alone among wealthier nations in keeping people in poverty , with by far the highest rates, especially for people in extreme poverty and for children. All other wealthy countries lift many more of their families out of the poverty created by their economies, and especially target child poverty. They know that poverty is the most important influence on children’s future education, earnings and health, as well as their odds of avoiding future poverty, unemployment, early child bearing, substance abuse and incarceration.
Hasn’t this idea been around for a long time? Yes, and across the political spectrum! Dr. Martin Luther King Jr. called for eliminating poverty, including “a secure and adequate income for all” in the Economic Bill of Rights promoted by the Poor People’s Campaign. Before him, conservative economist and Nobel Laureate, Milton Friedman called for a “negative income tax,” to create a guaranteed income for all. The Black Panthers, several women’s groups including the National Welfare Rights Organizations and the International Association for Feminist Economics, the Movement for Black Lives and the renewed Poor People’s Campaign, now led by Reverends Barber and Theoharis, have all called for a guaranteed income. A network of “Mayors for a Guaranteed Income” supports the idea, and some cities, including Stockton, California have implemented successful pilot projects.
How would the guaranteed income work? The Zewde team’s proposal would eliminate poverty as officially defined and also lift a number of families from the near poor or working poor into the middle class. The program would pay the most to households with the lowest incomes and taper off to nothing for single-adult families with annual incomes of $50,000 or more and two-adult families with $70,000 or more a year.
As outlined in their recent policy paper, Zewde and her co-authors call for the IRS to make monthly payments that total $12,500 a year for each adult and $4,500 for each child to households with zero income. That would raise them above the poverty line. Slightly smaller payments would be made to single-adult families with incomes above $10,000 a year and two-adult families with incomes above $15,000, and continue to decline until nothing would be paid to families in the upper half of the income distribution. Families would always be better off if they can earn some income by work, and may be able to earn more if they use some of their guaranteed income for training or to pay for child care.
The table below illustrates how the distribution of income among American households would change with a guaranteed income refund, by showing what percent of U.S. families would fall into five income categories defined by their relationship to the poverty line. The poverty line is complex, being defined for each family depending on the number of people in the household and their ages. For that reason, looking at multiples of the poverty line is the most straightforward way to see the impact on income distribution of this guaranteed income proposal.
How much is the federal poverty line? Most people think the federal poverty line is set too low. Poverty researchers often double the federal poverty line when talking about poor households. A family of four, with two adults and two children, isn’t considered poor if their total income is over $26,246. For a single senior citizen, it’s just over $12,000 a year. In Portland, most people have to pay more than $12,000 a year in rent alone , even for a studio apartment — which would leave nothing for food, transportation, medicine or anything else.
What’s more, that’s before paying any taxes! What people don’t realize is that poor people in this country pay more than a quarter of their income in taxes, when you consider all the taxes that people pay, not just income taxes. Berkeley economists Emmanuel Saez and Gabriel Zucman show, in their book, “The Triumph of Injustice,” that the very wealthiest people in the country pay the smallest slice of their incomes for all taxes combined. The wealthy like to call themselves “makers” and the rest of us “takers,” but the opposite is true.
For this reason, the Zewde team calls for adding a guaranteed income to our other anti-poverty efforts because housing, food aid and health programs will still be needed.
What would this guaranteed income program cost? Paying a guaranteed income to half of U.S. families would cost $876 billion a year, just 4% of our national income. That’s all it would take to move every household in the country above the poverty line, while also lifting the incomes of another 23 million families so that they were at least double the poverty line.
To put that in perspective, the federal government has wasted more than one-fifth of that much each year on the Trump tax cuts for the wealthy and another two-fifths each year to fight the wars in Iraq and Afghanistan. As predicted by many, neither effort delivered on any its promises.
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Why should we create a guaranteed income program? The free market alone will never eradicate poverty. Markets create wealth, but concentrate it in very few hands. The U.S. is one of the richest countries in the world, but the number of people who don’t even have shelter and enough to eat keeps growing.
All of the countries with lower poverty rates rely on the government to put a much higher proportion of their national income toward raising the living standards by providing public housing, public child care, national health care and pursuing different strategies for a guaranteed income. The U.S. ranks 30th among nations, when it comes to the proportion of its national income spent on cash benefits. A guaranteed income is essential to ensuring a better future for our children; to economic, race and gender justice; to creating community resilience and economic mobility; and to assuring a dignified life for all.
Street Smart Economics is a periodic series written for Street Roots by professors emeriti in economics. Mary C. King is a professor of economics emerita, Portland State University. Street Roots is an award-winning, weekly publication focusing on economic, environmental and social justice issues. The newspaper is sold in Portland, Oregon, by people experiencing homelessness and/or extreme poverty as means of earning an income with dignity. Street Roots newspaper operates independently of Street Roots advocacy and is a part of the Street Roots organization. Learn more about Street Roots . Support your community newspaper by making a one-time or recurring gift today .
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