This would be a sound argument if it didn’t miss the point. UBI isn’t really about welfare spending: It’s about tax policy.
UBI is an unconditional cash transfer, which means that you get money from the government to spend however you want. That’s an unusual government spending program. In the US, besides Social Security, the government usually either spends money on a service (like health care or education) or gives conditional cash in the form of things like food stamps.
But the government also spends a lot of money each year on cash transfers through “tax expenditures,” which is the money the government doesn’t collect in taxes because of exclusions in the tax code. Except for the Earned Income Tax Credit, those expenditures almost always help the rich more than the poor. By replacing them with UBI, we would create a more progressive system. That, not the elimination of all government programs, should be the starting place for debates about UBI.
So, if tomorrow we gave everyone $2,500 a year through UBI but eliminated the standard deduction, personal exemption, and itemized deductions, most people earning above $37,000 wouldn’t receive any new money. Those earning above $91,000 would actually lose money.
But that’s not all. If UBI were considered regular income, wealthy people lose even more money compared to the current system. Consider again the $2,500 example. Since the richest face a 39.6% marginal tax rate, they would actually only get $1,510 from the government after taxes. In the past, had they claimed the standard deduction and personal exemption and had there been no UBI, they would have gotten about $3,960. …
Advocates of UBI talk about $10,000 or $20,000 annual cash transfers. But UBI itself just means giving people some sum of money—there’s nothing that says it has to be extremely expensive at the start. The case described above is about the relatively limited amount of $2,500. And the beauty of it being universal is that it could have broad political support, just like the current standard deduction and personal exemption have now. The difference is that, while those deductions and exemptions are regressive and popular, UBI would be progressive and popular.