Can We Afford UBI? Yes—and Easily
One of the objections to universal basic income that one encounters is that it would cost too much and we can’t afford it. For example, an article in Business Insider notes that distributing $10,000 per year to all adults would “cost” $2.5 trillion a year. This is based on a fundamental misunderstanding of the basic math involved, a trap even some proponents fall into. Let me explain.
- UBI is an income transfer, not government consumption
Total disposable (after tax) personal income in the US was around $22 trillion in 2024 according to BEA NIPA Table 2.1.
If we had a UBI of $2.5 trillion the total after tax personal income in the US would be… still $22 trillion. Why? Because all the money collected in a fully tax-funded UBI would be distributed to individuals and available for personal consumption or saving as before. Unlike spending on defense or highways, the government is not using those resources itself. UBI changes the distribution of after-tax income, not its total amount.
That is the first glaring logic error in the argument.
- For better off people, the UBI payment is balanced by the UBI tax
The second flaw in the “too expensive” argument is the failure to recognize that, for better-off households, the additional tax is partly or entirely offset by the UBI they receive. So, if an upper-middle-class-household has to pay $20,000 in UBI taxes but gets $20,000 in UBI benefits, how much “extra” are they paying? The household’s net additional cost is zero.
A properly designed UBI tax – for example a progressive income tax surcharge balanced by UBI – would work exactly like a negative income tax.
In my book Shares in America: The Case for a Universal Basic Income, I use a simple progressive income tax to show how we could generate enough revenue to fully fund $1,000 per month UBI for all working-age adults 18-64.
The chart below shows the personal income distribution after UBI and this sample tax surcharge.
The bars are grouped by household income, the lowest 10%, the next 10% etc. You can find the source of this data and exactly how it was created in complete detail - including a downloadable spreadsheet - at https://www.sharesinamerica.com/sharesillustrations, Figure 21. The underlying data is from the Bureau of Economic Analysis (BEA) which uses various data sources to allocate aggregate US personal income across households.
“Shares in America,” the black rectangle, is a UBI of $1,000-per-month per working-age adult. The yellow areas are taxes: federal, state, local, and UBI tax. The blue bar plus Shares UBI is disposable after-tax income. Explaining this graph fully is not possible in a reasonable size post, but the key takeaway is that under the illustrative tax schedule in my model, the bottom 70 percent of households receive a net benefit, households somewhat above that point experience relatively small changes, and the largest net tax increases fall on the highest-income households but they are still disproportionately well off. In the BEA analysis, households in the lowest decile had average income of approximately $26,000 in 2019, including government benefits. Under my modeled UBI and tax schedule, their average income would have risen to approximately $45,000.
Using the tax schedule in my model, a $1,000-per-month UBI limited to adults ages 18–64 would be fully financed and would produce approximately $4.5 trillion in additional revenue over ten years beyond the UBI payments.
This additional revenue could be used to reduce our ballooning deficit, but I now favor UBI for all adults, including retirees. Using approximately two adults per household, that version produces an estimated ten-year funding gap of about $1.8 trillion. One possible way to address both that gap and at least part of the Social Security funding shortfall would be to remove the Social Security payroll-tax cap without increasing maximum benefits; my estimate indicates that this would raise approximately $3.4 trillion over ten years.
- There is plenty of income
In the US, personal disposable income was about $170,000 per household in 2025 after all federal, state, and local taxes are subtracted. This leaves plenty of room for some income to be shifted through the tax system from very high-income households to poorer households as shown in the chart. We’re not suggesting leveling incomes, just making them slightly less skewed. The “pain” involved at the upper end is minimal, one can live very nicely on, say $400,000 a year. Meanwhile it is very tough for a family to live on $26,000 per year, and some extra income will make a huge difference.
Summary
Claims that a universal basic income (I prefer to think of it as an income supplement) would “cost too much” often fail to consider that UBI is a transfer that doesn’t change overall personal income and does not add to government consumption. That addresses the issue of whether we can “afford” UBI at the national level. Claims that we can’t afford UBI are often really about whether the tax increase required on the well off would be “too much”. Critics often fail to note that for higher income households, any UBI related tax increase would be partially offset by the UBI payment itself. I show that a simple illustrative progressive income tax could fully fund a working-age UBI—and come close to funding an all-adult UBI—while only modestly changing the overall shape of the income distribution. The wealthy would still be wealthy.