Child Tax Credit Could Be a Bipartisan UBI Compromise

Common Ground, a new series, explores two sides of a contentious issue and finds an elegant compromise.

The idea is radical in its simplicity: Give people regular cash payments to help them meet their basic needs, with no strings attached. It’s a quick—albeit costly—way to fill gaps in the social safety net, and it’s the premise behind universal basic income, more commonly known as UBI.

Recent UBI test programs in places including Finland, Kenya and South Korea reflect increasing interest. The US, which has flirted with the concept since the negative income tax experiments of the 1960s and ’70s, hosts one of the longest-running UBI-lite programs, in the form of the Alaska Permanent Fund Dividend. It provides an annual payment to residents out of the mineral and oil royalties the state collects.

Since 2018, more than 150 pilots have launched across 35 states, targeting specific populations such as new mothers, youth transitioning out of foster care, formerly incarcerated people, domestic violence survivors and Black families that historically have been shut out of wealth-building opportunities. Over the span of months or years, these groups are getting regular payments of about $500 to $1,000 a month, funded by public and philanthropic dollars, to do with as they wish.

Opponents of UBI are also becoming more vocal, saying such programs deter people from working, eat into funds that would be better used on food or housing aid, and even run afoul of state constitutions. Texas Attorney General Ken Paxton sued Harris County in April to halt its guaranteed income pilot, and at least nine states have proposed or passed legislation that would preempt localities from starting their own.

Faced with the reality of widening inequality, is there a way for polarized policymakers to find rare common ground?

Unlike food stamps or housing vouchers, unconditional cash can just as easily be spent on gas and groceries as on birthday presents or an emergency car repair. Although research shows recipients typically use the money for essentials, the flexibility is the point, advocates say.

“Guaranteed income allows people to juggle multiple issues at the same time,” says Mary Bogle, a principal research associate at the Washington, DC-based Urban Institute who’s studied such programs. Stripping away onerous application processes can make them cheaper to administer, too, she says.

Studies have shown the effects of even short-term income boosts can be profound, especially when delivered to parents. The probability of poverty increases 33% for US women after they have a kid, as costs go up and income can get interrupted, according to the Columbia University Center on Poverty and Social Policy. Getting cash aid early in life has been linked to greater high-frequency brain activity; fewer referrals to Child Protective Services; and better test scores, higher educational attainment and higher incomes as adults.

“Providing more income to parents will—not ‘maybe will,’ will—improve the economic prospects and well-being of children in those households,” says Bogle. “What we are getting from these pilots is a much more stable next generation who will have advanced economic mobility.”

But the benefits go beyond childhood. Research on a Manitoba basic income experiment from the ’70s suggested it reduced acts of intimate partner violence. In city after city, recipients have reported being less stressed and happier—and having more time to spend with their families or to train for and apply for better jobs.

The most obvious case against a truly universal basic income is that it would be prohibitively expensive. Critics argue that, to free up money for such a benefit, governments would have to cut spending on other social services. Doling out monthly checks to the nation’s wealthiest, even if that money were to be clawed back later via taxation, strikes many as misguided. Others see even more targeted UBI programs as another form of welfare that disincentivizes people from working.

Research on the impact of cash assistance on labor is mixed, and the effects are often marginal either way. It’s also easy for opponents to discount any findings that come from small-scale local pilots. Sure, 125 people in Stockton, California, had better odds of working full time after a year of monthly checks. But what happens if the program doesn’t sunset and the number of beneficiaries is massively expanded?

These echo some of the arguments of the Foundation for Government Accountability, a conservative think tank that’s been pushing for legislation at the state level to stop localities from piloting guaranteed income programs; South Dakota, Idaho and Iowa all passed such laws this year. Other opponents are pressing their case before the courts. The Supreme Court of Texas has placed the Harris County pilot on pause after Attorney General Paxton argued it was unconstitutional. And a similar lawsuit was filed in St. Louis.

“Using taxpayer resources to further expand the welfare state, which has failed, is not good policy,” says Haley Holik, a senior fellow at the Foundation for Government Accountability. “Workforce participation shrinks, and that’s bad for communities, it’s bad for small businesses, it’s bad for the economy.”

For centuries, UBI-style policies have gotten the nod from across the political spectrum. Martin Luther King Jr. and the National Welfare Rights Organization saw guaranteed income as a tool for racial and economic justice. Milton Friedman, the conservative economist, thought a negative income tax would free us from the bureaucracy of the existing welfare state. Andrew Yang, who ran for the Democratic presidential nomination in 2020, pledged a Freedom Dividend, anticipating a wave of American workers made jobless by robots.

Today guaranteed income has more support among the political left, though polling by the left-leaning nonprofit Economic Security Project indicates about half of independents and under-50 Republicans say they’re on board. And there’s growing bipartisan consensus around one genre of direct cash aid: the kind for parents.

A universal credit that benefits young children, who can’t control their circumstances, has broad appeal, according to Josh McCabe, director of social policy at the Niskanen Center, a nonpartisan think tank. “When it comes to adults, we tend to think that we should only be fully supporting people if they can’t support themselves,” he says.

During the pandemic, the existing federal child tax credit was expanded for all but the wealthiest families. The credit almost doubled, to as much as $3,600 per child, and was made fully refundable—meaning even low- or no-income households that had once been shut out could receive the full amount. The expansion lifted more than three million children out of poverty, before it expired.

Congress now is debating a bipartisan bill that would help more lower-income families get a bigger credit. The Center on Budget and Policy Priorities estimates that, if passed, the bill could lift around 400,000 kids above the poverty line in its first year. States are meanwhile providing their own case studies. Fifteen of them—red, blue and purple—administer their own child tax credits, and most of those programs have no minimum income requirements.

Few politicians are seriously talking about adopting a true UBI that covers the Jeff Bezoses of the world along with the regular Joes. But some of the movement’s core principles—streamlining social services and making them easier to access—are seeping into more government programs, says Stephen Nuñez, a senior research associate at the policy evaluation firm MEF Associates. For instance, knowing that landlords often discriminate against renters who pay with vouchers, the Department of Housing and Urban Development is considering a test program that would replace some vouchers with cash.

“Cash can’t solve all problems,” Nuñez says. “But the lion’s share of why poverty and child poverty and material hardship in the United States is as high as it is relative to other countries is just because people just don’t have enough money. Solve that one problem first, and then see what’s left over afterwards.”Read next: How to Do a Four-Day Workweek That Actually Works