How to Calculate the Cost of a Universal Basic Income
The gross cost of a universal basic income equals the payment per person times the number of recipients, and the tax rate that funds it equals that cost divided by the taxable income base.
The Universal Basic Income Cost formula
Calculator
Enter the payment, the recipient count and the tax base to get the gross cost, the funding tax rate and break-even earnings.
What every recipient gets each year, with no means test and no work test.
Everyone the payment goes to. Adults only, or adults and children, changes this a lot.
The income across the economy that the funding tax would apply to.
Used to show where a single household lands, gainer or funder.
Paying every recipient costs $3T a year before a cent of it is taxed back.
- Flat tax rate that funds it
- 12%
- Break-even earnings
- $100,000
- Funding tax paid by this earner
- $7,200
- Net position for this earner
- $4,800 ahead
- Share of the payment taxed back
- 60%
Covering that cost takes 12% of the taxable income base, which is the price the funding side actually charges.
Someone earning $100,000 pays exactly what the payment gives them, so that is the line between gainers and funders.
The new tax takes $7,200 from this household to help pay for the program.
The payment beats the tax bill by $4,800, so this household is a net receiver.
60% of this person's payment comes straight back as tax, which is why the net cost sits far below the gross cost.
How to calculate Universal Basic Income Cost, step by step
- 1Multiply the payment by the recipients. Gross cost = payment per person × number of recipients. Count only the people the payment actually goes to, since adults-only and everyone-including-children give very different totals.
- 2Divide the cost by the taxable income base. The flat rate that funds the program equals gross cost ÷ taxable income base. Pricing a proposal this way says who pays, which the gross cost on its own never does.
- 3Find the break-even earnings. Break-even earnings = payment ÷ funding tax rate. Below that level a person receives more than they hand over, and above it they fund more than they get.
- 4Net the payment against the tax for one earner. Net position = payment − (funding tax rate × earnings), which turns a national figure into what one household gains or pays.
- 5Quote the net cost, not the gross cost. Much of the payment returns to the treasury as tax from people above the break-even level, so the net transfer is far smaller than the headline number.
Worked example: Universal Basic Income Cost
Suppose a country pays every adult $12,000 a year and has 250 million adults. Gross cost = 12,000 × 250 million = $3 trillion. If the funding tax falls on a taxable income base of $25 trillion, the flat rate needed is 3 ÷ 25 = 12%. Break-even earnings = 12,000 ÷ 0.12 = $100,000. An adult earning $60,000 pays 0.12 × 60,000 = $7,200 in new tax and receives $12,000, a net gain of $4,800, so the tax takes back 7,200 ÷ 12,000 = 60% of that person's payment. An adult earning $200,000 pays $24,000 and nets a loss of $12,000, which is where the money comes from.
Universal Basic Income Cost questions
Why is the net cost lower than the gross cost?
Because the tax that funds the payment falls on the same people receiving it. Anyone earning above the break-even level pays more in new tax than the payment is worth, so most of the money returns to the treasury and never leaves as a net transfer.
How do you find the break-even earnings?
Divide the payment by the funding tax rate. A $12,000 payment funded by a 12% flat rate gives 12,000 ÷ 0.12 = $100,000, so everyone earning below that comes out ahead and everyone above pays for it.
Does the recipient count include children?
That depends on the proposal, and it changes the answer a lot. Some plans pay adults only, others pay a smaller amount per child, so the count you multiply by has to match the payment you entered.
Is a universal basic income the same as a negative income tax?
No. A universal basic income pays everyone the same amount and recovers it through the tax system, while a negative income tax pays only households below its break-even income. The two can leave households in the same final position while reporting very different gross costs.
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