Photo by Yogoman

Universal Basic Income proposals being hailed as socialist, or even communistic, by conservative politicians and news media fail to recognize that such programs already exist and are highly successful. For instance, Alaska has the smallest income inequality in the country and it’s largely because the Alaska Permanent Fund sends a yearly check to every man, woman, and child that is a citizen of the state. Even if you don’t pay any taxes, work, or contribute to society you get a check all the same.

Alaska may seem like a libertarian paradise with no income tax and a government that gives the state’s earned income back to the citizens, but many of its government’s policies are more liberal than you think. First, Alaska actually has one of the highest state corporate income taxes in the U.S. Second, it has one of the highest property tax rates, which predominantly falls on richer Alaskans to pay. Finally, Alaska has one of the highest percentages of citizens who work for the government — picture thousands of Ron Swansons. However, Alaska is a unique place, could this model work for the entire United States? Yes, let me tell you why!

How the Alaska Permanent Fund Works

The Alaska Permanent Fund was established in the 1970s by Alaskan Governor Jay Hammond. The first payment came in 1982 because the Fund needed a few years to grow before payments could begin. Like the system established by the country of Norway, the fund invests profits from the state’s oil fields into an investment portfolio that pays out a percentage of the fund’s profits to its citizens each year. The Alaskan fund provides each citizen with a yearly check, generally between $1,000–$2,000.

What are the Benefits for Alaskans?

Alaskan parents tell stories about how they saved the yearly checks for their child’s education fund, covering most of their child’s college expenses. Other Alaskans say the money is used for doctor visits, stocking up on groceries for the winter, making necessary repairs, or paying off credit card debt. Roughly 60 percent of Americans in the lower 48 states don’t have $1,000 in savings and become distressed when unexpected costs arise. Any type of emergency can be disastrous for these families. The Alaskan Permanent Fund has successfully provided Alaskans with an influx of cash for large expenses and is a big reason why Alaska has among the least economic inequality of any state.

The checks have also proven beneficial for the Alaskan economy. Poorer people tend to spend a larger percentage of their income on things that go right back into the local economy; such as groceries or car and home repairs. We see Alaskans spending their Fund income similarly to how people spend their tax refund checks. In the days and weeks following tax refunds, there is a spike across America in economic activity on large expenses related to health, home and auto, and a reduction in credit card debt. Imagine what a boon for the economy we’d see if Americans also received a paycheck six months after their tax return payment, say at the end of summer when school is starting up and cool weather returns.

How Could this Work for the U.S. as a Whole?

The U.S. has a lot more people than Alaska (330 million vs 700,000), which makes this task a numbers game. Where would the money come from to fund such a proposal? Democratic presidential candidates Cory Booker, Kamala Harris, and Andrew Yang all have proposals to provide forms of universal basic income to Americans and all three proposals are paid for with increasing taxes that already exist, making it hard to sell.

Instead, I propose America has a one-time tax to get the program started and then provide continued funding by directing excise payments (such as a carbon tax) to fund the program long-term. There could be a one- or two-year period where all U.S. businesses pay 5 percent of their profits into a new fund. The fund would then be maintained by excise payments on other activities. For example, instead of getting money from leasing state-owned oil reserves, like in Alaska, the fund could receive income from a carbon tax.

One of the concerns that has been raised about carbon taxes in the past is that it will disproportionately increase the cost of goods purchased by poorer people. But if all of the income (and then some) from the carbon tax goes to the people most affected by the tax, they will have a net positive increase in their income. And on top of that, as discussed above, this money most often is spent in their local community. Additionally, a carbon tax would effectively reduce greenhouse gases and slow climate change (no small co-benefit). Combining these two proposals would help the U.S. lead the world by maintaining economic growth and reduce income inequality while also preserving the planet.

What are the Next Steps?

It’s exciting to see Universal Basic Income proposals make it into the main platform of presidential candidates. The popularity of these programs has pushed these candidates and their ideas into the forefront. Should one of these candidates make it to the White House, they will have to get Congress’ buy-in and work out how to implement this proposal.

Further Reading:

I have written several related Medium articles on taxes and investing: