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This post is in response to the question "What are the advantages and disadvantages to universal basic income?" posed by @dylangrimes00.
I feel like the answer to this question is very dependent on how the Universal Basic Income (UBI) is funded. For example, when Andrew Yang was running for president and advocated for the implementation of a UBI, his method of funding it required a tax on manufacturing costs. This seems to be a more problematic way of funding a UBI as it seems that it would have a direct impact on inflation. If a manufacturer’s cost of producing a product becomes more expensive, they are likely to increase the price of the product for the consumer, so the benefit of citizens having the UBI may be negated by the cost of living that may increase. However, an income tax increase or a marginal tax rate may avoid these problems. The advantages of a UBI that is funded in the proper ways would be mostly seen by impoverished or low-income individuals that would then have more money to use in their day to day spending or to be used by investing some of their income, so the economy is able to be further stimulated by their participation in the economy. Additionally, it may allow for more social mobility since there would be less impact by the “invisible” costs of poverty. For example, often times, impoverished people end up spending more on things like rent, credit card bills, and various other costs because they have to pay things like late fees since they had to wait or strategically plan how to spend money from paycheck to paycheck. If rent is due on the 1st of the month, but someone’s paycheck does not hit their bank account until the 3rd, they typically must pay more than the expected rent. A UBI may allow more flexibility for this. Some potential disadvantages to UBI are mostly rooted in inflation and perceived unemployment spikes. Many people critique UBI as an incentive not to work since people would have a source of income independent from their jobs. However, this could easily be seen as a safety net instead. A UBI should not (and is typically not advocated to be) large enough that it can provide a living wage, but rather, it should be seen as a padded income that would lessen the impact and consequences of being fired or between jobs. Additionally, if handled properly, we could likely avoid many of the fears that UBI would cause drastic inflation. It is possible to do in a way that would not cause a drastic spike, but rather, a gradual increase in inflation—much like how inflation naturally occurs already.
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