The Rich and Universal Basic Income: Why They Might Resist?

In recent years, the concept of a Universal Basic Income (UBI) has gained significant traction among policy-makers and civic leaders. It is posited that a UBI would grant every adult in a country a fixed sum of money, year-round, with no conditionalities. One proposed model suggests a monthly payment of $1000, amounting to $12,000 annually. However, this structure would present unique challenges and potential resistance, particularly from the wealthy section of society.

Financial Impact on the General Population

According to the proposed UBI model, the total financial burden on the U.S. government would be approximately $2.3 trillion annually. This is achieved by closing 126 welfare programs, which would collectively save $1 trillion in Medicaid and Social Security expenses. The remaining $1.3 trillion is covered by a Value Added Tax (VAT) at a rate of 10%. This increase in VAT would lead to a 10% increase in the cost of goods sold. Econometrically, anyone spending less than $120,000 annually would still benefit from this increase, as costs for $120,000 would rise by $12,000, essentially breaking even with their UBI.

The Spending Threshold and Budgetary Impact

Crucially, 80% of the country spends less than $120,000 annually. However, this figure presents a paradox for the wealthy. The 20% of the population that does not benefit financially from the UBI is predominantly the wealthiest, those with annual expenditures exceeding $120,000. This economic disparity is significant because money is both a symbol and a source of value, power, and influence. The more money one spends, the greater the financial impact of this new tax. A business mogul who spends $10 million a year would see their costs escalate by 10%, adding an additional $1 million, a substantial sum that could strain their budget. Consequently, it's likely that such individuals would find it far more cost-effective to lobby against the new VAT.

Interestingly, it's estimated that wealthy individuals might even be willing to spend $1 million annually to lobby against the additional $1 million in taxes this measure would impose. Such actions highlight the potential for resistance from the wealthy against initiatives that may negatively affect their financial bottom line.

Economic Realities and Business Impact

The resistance from the rich is not solely due to the direct financial burden but also extends to the broader economic environment. While UBI could serve as a significant economic stimulus, benefiting 80% of the population, it does not offer a clear, direct financial win to rich individuals, many of whom are skeptical of job-disrupting technologies. A UBI of $1000 per month could potentially lead to 4.5 million new jobs and a gross economic boost of $2.5 trillion, as projected by the Roosevelt Institute. This economic surge would enable businesses to reach new peaks of productivity, lower costs, increase production, and enhance profits. Moreover, a UBI could facilitate a massive surge in entrepreneurship, as studies indicate that entrepreneurs share a common trait: economic security. A UBI of $12,000, although not substantial, could make a significant difference to those contemplating entrepreneurial ventures, profoundly altering their business dynamics.

The Inevitable Resistance

It's inevitable that the wealthy will resist UBI, especially given the forecast from Oxford that up to 70 million U.S. jobs could be automated by 2035. Ensuring market stability and consumer spending is crucial for the economy, and with an estimated 70 million jobs at risk, wealthy stakeholders may feel compelled to support UBI measures to navigate this future economic landscape smoothly. However, the current resistance from the rich is understandable given the direct financial impact they would face. Despite this, supporting a UBI is becoming increasingly necessary to address the evolving job market and economic challenges.