How the math could work out for publicly-funded Universal Basic Income in Arlington

Income inequality is prevalent throughout the world and the United States is one of the top offenders. Consider Arlington County, which has a staggeringly uneven geographic distribution of income – whereas only 2% of kids at Tuckahoe Elementary School get a free lunch, 81% qualify just two and a half miles away at Carlin Springs Elementary.

Arlington is quite progressive in assisting those in need, perhaps because of this disparity. In addition to federally-funded meals, about 1-2% of the county’s budget is spent on affordable housing each year. As a Housing Commissioner, I’ve come to appreciate just how hard county staff work to connect families with the benefits for which they qualify.

But I have also come to believe that there is a much better way: universal basic income (UBI). Every Arlingtonian, rich and poor alike, could be given $550 a month, leaving few families below the poverty line, if the property tax rate were tripled. The net income of a family of four living in a house worth less than $1.36 million would be higher, as this UBI dividend would exceed the increase in tax.

UBI is a form of social support in which everyone is given the same amount of money with no conditions on how it is spent. It is simpler than the myriad forms of specific programs we have now (e.g. housing vouchers, food stamps, etc.), fairer because it treats everyone equally (i.e. there are no income, number of children, or age requirements to satisfy), dignified in that one’s socioeconomic status is not revealed by spending it (thereby avoiding embarrassment and discrimination), and efficient as it requires less administration by government officials (e.g. no “means test”). The concerns that it disincentivizes people to work or that recipients will spend it frivolously have been discredited by numerous studies. Its advocates cross the political spectrum and include Martin Luther King Jr. and James Baker.

Nationally, the closest thing we have to a UBI now is the earned-income tax credit (EITC), which is partially matched by many states. While the size of this credit and those eligible for it have both expanded over time, there is still a work requirement and the maximum annual payout is less than $7,000. The EITC is hence neither universal, in the sense that not everyone gets it, nor basic, as it alone is not enough to provide adequate shelter and food. Given today’s partisan politics, it might be quite some time, if ever, before another American president tries to enact a UBI (Richard Nixon’s attempt in 1970 was blocked by the Democrat-controlled Senate).

In the meantime, some municipalities have piloted or are piloting their own programs, including Arlington, Alexandria, and Montgomery County. These three DC area programs offer between $500 and $800 per month to 150-300 families for between 18 and 24 months. As with a UBI, there are no restrictions on how the money is spent, but because the funding levels are so low and are only for a limited time these programs are neither universal nor basic. Further, Arlington’s program is funded solely through private donations.

So how could Arlington extend its pilot program indefinitely, expand it to bring every family out of poverty, and do so using public funds instead? With a population of 228,000 one would need $1.5 billion each year to give every person there, children included, $550 per month. For a family of four, this equates to $26,000 per year, which is the poverty level for a family of that size (and well below Arlington’s median household income of $120,000 per year). Parents could collect on behalf of their children, possibly saving a portion to pay for college.

Where could that money come from? In 2021, about half of Arlington’s budget was derived from a 1.026% real estate tax yielding $795 million. An additional $1.5 billion could be realized with a tax rate just below 3%.

$1.5 billion might seem like an awful lot of new tax for a county whose total budget is currently only $1.8 billion. But since it would all be given back in the form of cash, it is best to consider what the change in net household income would be after adding the UBI and subtracting the new higher tax. This of course would vary with the size of the family and the value of their house. The breakeven points are simple to calculate: those who own a $1.36 million house for a family of four, $680,000 for a couple, and $340,000 for someone living alone. Families living in houses worth less than these price points would see an increase in net income; those with larger house values would see a corresponding decrease.

What about renters? While they do not pay real estate tax directly, their landlords would likely increase the rent to offset the higher tax. But as renters would get the UBI dividend too, they should have the extra income to cover it. It’s not clear exactly how a transfer of wealth of this magnitude would affect things like property values and housing density, but that is something we could learn and study as a UBI is gradually phased in.

Importantly, $550 per month per person is larger than a housing grant from Arlington (which is similar to a federal housing voucher), so even if this program were replaced with a UBI, those families would still see an increase in income.

How do we get there from here? Given that the average assessed value for a detached home in Arlington, at $1 million, is less than the break even point, and that the median should be even less, far more people will benefit from a UBI than not. We just need to get them to vote.