How to Fund a Universal Basic Income Without Increasing Taxes or Inflation

The policy of guaranteeing every citizen a universal basic income is gaining support around the world, as automation increasingly makes jobs obsolete. But can it be funded without raising taxes or triggering hyperinflation? In a panel I was on at the NexusEarth cryptocurrency conference in Aspen September 21-23rd, most participants said no. This is my rebuttal.

In May 2017, a team of researchers at the University of Oxford published the results of a survey of the world’s best artificial intelligence experts, who predicted that there was a 50 percent chance of AI outperforming humans in all tasks within 45 years. All human jobs were expected to be automated in 120 years, with Asian respondents expecting these dates much sooner than North Americans. In theory, that means we could all retire and enjoy the promised age of universal leisure. But the immediate concern for most people is that they will be losing their jobs to machines.

That helps explain the recent interest in a universal basic income (UBI) – a sum of money distributed equally to everyone. A UBI has been proposed in Switzerland, trials are beginning in Finland, and there is a successful pilot ongoing in Brazil. Theree cities in Ontario, Canada, the city of Oakland in California, and Utrecht in the Netherlands are planning trials; two local authorities in Scotland have announced such plans; and politicians across Europe, including UK Labour Party leader Jeremy Corbyn, have spoken in favor of the concept. Advocates in the US range from Robert Reich to Mark Zuckerberg, Martin Luther King, Thomas Paine, Charles Murray, Elon Musk, Dan Savage, Keith Ellison and Paul Samuelson.  A new economic study found that a UBI of $1000/month to all adults would add $2.5 trillion to the US economy in eight years.

Welfare can encourage laziness, because benefits go down as earned income goes up. But studies have shown that a UBI distributed equally regardless of income does not have that result. In 1968, President Richard Nixon initiated a successful trial showing that the money had little impact on the recipients’ working hours. People who did reduce the time they worked engaged in other socially valuable pursuits, and young people who were not working spent more time getting an education. Analysis of a similar Canadian trial found that employment rates among young adults did not change, high-school completion rates increased, and hospitalization rates dropped by 8.5 percent. Larger experiments in India have reached similar results.

Studies have also shown that it would actually be cheaper to distribute funds to the entire population than to run the welfare services governments engage in now. It has been calculated that if the UK’s welfare budget were split among the country’s 50 million adults, each of them would get £5,160 a year.

But that is not enough to cover basic survival needs in a modern economy. Taxes would need to be raised, additional debt incurred, or other programs slashed; and these are solutions on which governments are generally unwilling to embark. The other option is “qualitative easing,” a form of central bank quantitative easing in which the money flows directly into the real economy rather than simply into banks. In Europe, politicians are taking another look at this once-derided “helicopter money.” A UBI is being proposed as monetary policy that would stimulate productivity without increasing taxes. As Nobel prize-winning economist Joseph Stiglitz, former senior vice president of the World Bank, explains:

. . . [W]hen the government spends more and invests in the economy, that money circulates, and recirculates again and again. So not only does it create jobs once: the investment creates jobs multiple times.

The result of that is that the economy grows by a multiple of the initial spending, and public finances turn out to be stronger: as the economy grows, fiscal revenues increase, and demands for the government to pay unemployment benefits, or fund social programmes to help the poor and needy, go down. As tax revenues go up as a result of growth, and as these expenditures decrease, the government’s fiscal position strengthens.

Why “QE for the People” Need Not Be Inflationary

The objection  to any sort of quantitative easing in which new money gets into the real economy is that when the money supply grows too large and consumer prices shoot up, the process cannot be reversed. If the money is spent on a national dividend, infrastructure, or the government’s budget, it will be out circulating in the economy and will not be retrievable by the central bank.

But the government does not need to rely on the central bank to pull the money back when hyperinflation hits (assuming it ever does – it has not hit after nearly nine years and $3.7 trillion in quantitative easing). As Prof. Stiglitz observes, the money issued by the government will return to it simply through an increase in fiscal revenues generated by the UBI itself.

This is due to the “velocity of money” – the number of times a dollar is traded in a year, from farmer to grocer to landlord, etc. In a good economy, the velocity of the M1 money stock (coins, dollar bills, demand deposits and checkable deposits) is about seven; and each recipient will pay taxes on this same dollar as it changes hands. According to the Heritage Foundation, total tax revenue as a percentage of GDP is now 26 percent. Thus one dollar of new GDP results in about 26 cents of increased tax revenue. Assuming each of the seven trades is for taxable GDP, $1.00 changing hands seven times can increase tax revenue by $7.00 x 26 percent = $1.82. In theory, then, the government could get more back in taxes than it paid out.

In practice, there will be a fair amount of leakage in these returns due to loopholes and deductions for costs. But any shortfall can be made up in other ways, including closing tax loopholes, taxing the $21 trillion or more hidden in offshore tax havens, or setting up a system of public banks that would collect interest that came back to the government.

A working paper published by the San Francisco Federal Reserve in 2012 found that one dollar invested in infrastructure generates at least two dollars in “GSP” (GDP for states), and “roughly four times more than average” during economic downturns. Whether that means $4 or $8 is unclear, but assume it’s only $4. Multiplying $4 by $0.26 in taxes would return the entire dollar originally spent on infrastructure to the government, year after year. For precedent, consider the G.I. Bill, which is estimated to have cost $50 billion in today’s dollars and to have returned $350 billion to the economy, a nearly sevenfold return.

What of the inflation formula typically taught in economics class? In a May 2011 Forbes article titled “Money Growth Does Not Cause Inflation!”, Prof. John Harvey demonstrated that its assumptions are invalid. The formula is “MV = Py,” meaning that when the velocity of money (V) and the quantity of goods sold (y) are constant, adding money (M) must drive up prices (P). But as Harvey pointed out, V and y are not constant. As people have more money to spend (M), more money will change hands (V), and more goods and services will get sold (y). Demand and supply will rise together, keeping prices stable.

The reverse is also true. If demand (money) is not increased, supply or GDP will not go up. New demand needs to precede new supply. The money must be out there searching for goods and services before employers will add the workers needed to create more supply. Only when demand is saturated and productivity is at full capacity will consumer prices be driven up; and they are not near those limits yet, despite some misleading official figures that omit people who have quit looking for work or are working only part-time. As of January 2017, an estimated 9.4 percent of the US population remained unemployed or underemployed. Beyond that, there is the vast expanding potential of robots, computers and innovations such as 3D printers, which can work 24 hours a day without overtime pay or medical insurance.

The specter invariably raised to block legislators and voters from injecting new money into the system is the fear of repeating the notorious hyperinflations of history – those in Weimer Germany, Zimbabwe and elsewhere. But according to Professor Michael Hudson, who has studied the question extensively, those disasters were not due to government money-printing to stimulate the economy. He writes:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending. The dynamics of hyperinflation traced in such classics as Salomon Flink’s The Reichsbank and Economic Germany (1931) have been confirmed by studies of the Chilean and other Third World inflations. First the exchange rate plunges as economies pay for foreign military spending during the war, and then – in Germany’s case – reparations after the war ends. These payments led the exchange rate to fall, increasing the price in domestic currency of buying imports priced in hard currencies. This price rise for imported goods creates a price umbrella for domestic prices to follow suit. More domestic money is needed to finance economic activity at the higher price level. This German experience provides the classic example.

In a stagnant economy, a UBI can create the demand needed to clear the shelves of unsold products and drive new productivity.  Robots do not buy food, clothing, or electronic gadgets. Demand must come from consumers, and for that they need money to spend. As robots increasingly take over human jobs, the choices will be a UBI or to let half the population starve. A UBI is not “welfare” but is simply a dividend paid for living in the 21st century, when automation has freed us to enjoy some leisure and engage in more meaningful pursuits.


Ellen Brown is an attorney, founder of the Public Banking Institute, a Senior Fellow of the Democracy Collaborative, and author of twelve books including Web of Debt and The Public Bank Solution. A 13th book titled The Coming Revolution in Banking is due out this fall. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at

63 Responses

  1. Ellen , All that has to be done is TAX = Robots that use Everything in Country built by the Humans. Their Products have to use OUR Hwy s’ ECTH , ECTH < ECTH

  2. I’m thoroughly with you on this. There is one fly in the ointment that make things work out otherwise, however – what if people used the UBI to pay down debt?

    We need to pay down debt, that’s for sure, because the high level of private debt to GDP is threatening to induce the next crash ((Minsky, Keen). Thus UBI might be a good way to get the economy onto safer ground, allowing more money to circulate in trade instead of being absorbed as interest, but that would undercut the returns to government through taxation.

    Do you have any thoughts about this dilemma?

    • Hi Guy, one possibility would be to distribute the UBI as debit cards that only worked for consumer goods. But even if the money is used to pay down debt, it will free up other funds for consumables which are taxable. Paying off your credit card allows you to charge more! Not that we want to encourage frivolous spending, but people are more frugal with their funds when they know the have big debts to pay.

  3. For me, a UBI is to just fill the leakages from government mandated full employment, aka a job guarantee scheme. I think we should have this first because the protestant work ethic is still alive and well. People like to have a job. The jobs must pay a living wage, tax free income [which is usual already] If the jobs are too menial for some they might have to take them as a stop gap, but for lack of available positions the UBI will fill the gaps.
    I agree with Stiglitz and his contention that the money spent will boost the economy and not be a source of excess inflation.
    But I do not agree about taxes. Monetary Sovereign governments do not need taxes or borrowing to spend. They create their currency through spending. They buy their debts with freshly created money ad hoc. These governments can never go bankrupt. The Constitution gives them the unique capacity to control their currency which means spending as they see fit. So the UBI can be paid without requiring an offset account to debit. Explanations can be long winded, but this is the nub of paying for it.

    • True, the government has the power to just issue $3 trillion annually in UBI, but over a decade it will have added $30 trillion to the money supply. That will necessarily drive prices up. Taxes are not for funding the government. They are for preventing inflation. The money needs to be recycled back to the source so that it can be issued again.

      • u make a good point here. Taxes act as a mean of recirculating existing money that has been put into circulation. Profits and savings remove $ from circulation, thereby driving down Velocity and forcing more printing. Excessive profits/savings removes too much from circulation too fast, causes crashes till govt opens up deficit spending.

        When $ is removed too fast from circulation (as profit/savings) the root cause is too much consolidation by industry participants or worker wage suppression from industry collusion…depending on industry size/scope.

        We need higher velocity to ensure healthy circulation of $ into the economy. Large profits a like blood clots that need to be thinned out.

      • That recycling is indeed what happens, except it’s a cycle of destruction and rebirth. The Taxes are sent to Treasury and the government buys new debts to stimulate the economy. The same money does not circulate once it’s turned into a federal tax.
        The added money in circulation will not necessarily lead to inflation. But it will add to GDP. These will probably match. Yes it will lead to needing more goods and services, but that’s what we want.

        • I agree you are correct in the technical sense, but the “taxes destroys $” line confuses the heck out of ppl who don’t understand monetary operations details. The “real effect” is that the govt spending is based in large part to what it collects(destroys) in taxes. Using the destruction analogy is unnecessarily confusing unless you r having extremely detailed conversation bout Treasury operations.

          While we don’t need taxes for ubi, the likelihood of getting enough ppl to actually understand what that means in terms of debt/deficit/distribution and passed into law is slim. A payments tax would allow the UBI funds to be raised and recirculated as a means accounting for it, which most folk can understand and therefore be more likely to support this method.

          A great analogy to my point is UBI would then become like the “rewards” points on credit cards. Credit cards take a small % of the total payment and then return a portion of that back as a sort of dividend. So, call UBI “a citizens dividend” and watch how many more people get behind it. Need to add some effective marketing spin if we want to get people to by in!…;-)

          • Frankly, Jack, I could care less about the semantics so whatever subterfuge that actually works is OK by me. Your idea might work, my idea might work, but as you say the concept itself needs to have the majority behind it for any progress to occur.
            At this time understanding is abysmal, even on this site, and so a resolution is going to need a significant event.
            During WW2 the ideas behind MMT were understood and acted upon, as war is no place for fake theories. However in peacetime the academics gained undue influence and the so called mainstream became dominant. Neo-liberal policies stemmed directly from that.

    • What you are proposing is a totally inflationary item in the economy, unsupported by the work ethic that would supply the products and services that grow the GNP, which the money supply should roughly track to prevent inflation…it won’t work. A blend of work ethic, taxes, fees, tariffs (my (?) idea of indexed tariffs based on foreign worker abuses, pollution and over-population are some helps for the American worker, while improving, incentivizing world conditions in all countries, unlike china’s recent requirements for American made cars, etc., but similar, etc. Even our welfare systems are changing to reflect the work ethic that built western civilization, and which is necessary to maintain and improve it as with the state of Maine, where all able-bodied, 18-45 must work at government specified jobs to obtain benefits with other states about to do the same. A ubi, would be as bad as the Cloward -PIven attempt to put everyone on a ‘free-stuff’ mentality so government could totally control our every move….as planned so long ago if you know ?

      • You are saying that the spend to pay for a UBI would not add to GDP and be self supporting? Since Spending into the economy is the way we grow it your contention it would lead to excess inflation is totally erroneous.

        • Wrong !…since nobody would be working to replace the goods sold, deflation might even arise due to scarcities, but initially as people clambered for what “free stuff” there was, inflation would be the order of the day….too much sales ? raise prices ! …basic economics.

          • Working or not, you are still spending. I stand by what I say. “free money” doesn’t mean lazy unless you are a conservative know nothing.

            • So, what happens when society runs out of “free stuff”, and the UBI has nothing to buy ?

              • The end of civilization, Tom. We can’t avoid it and if there are no longer resources affordable to spend on everything will come down like a house of cards. BTW The money is free, resources aren’t.

                • No, I mean if not enough people contribute to the making of stuff as they can ‘get by’, by doing nothing. As an example, the state of Maine has had in place for several years a welfare program that requires all able-bodied, childless, 18-45 to work at government specified jobs or lose all benefits, etc.

  4. There is a basic flaw in Economic thinking that the solution to all economic problems is by increasing Demand side of the Supply and Demand Curve through indirect means, ie QE (Basic Income), Lower Interest Rates, Easy Credit, Reduced Taxes. All of which have unintended consequences. The Supply side is never considered or addressed when it comes to stimulating growth in the economic through more effective, efficient tools which increase output (supply) and hence lower prices. This economic thinking is what has created the problem where we are today. We’ve already stole future sales and spending by the debt binge the world is on. There’s plenty to be said, but I will stop there. L. Hansen

    • I’ll guess you haven’t read Ellens books?

      Economy is currently running at 76% utilization. There is plenty of demand and plenty of supply, but not enough CAPABILITY TO CONSUME (aka: $ in the pocket of people who are willing to spend it)

      This is classic result when profits are too high and going to to few people who don’t spend back into the economy vs what they take out of circulation.

      Wage suppression is also a big factor. Major consolidation across many industries has eliminated massive amounts of jobs, lowered competition for non-union employees, industry collusion to suppress wages via industry consultants,

      So, supply side is truly the wrong way to look at solving economic problems. BI helps offset some of the problems i listed above. Good tax policy can also help, but eliminating inheritance tax for billionairs surely won’t trickle down to anyone.

  5. Ellen! This is your best article ever (continuing an historical pattern) 🙂

    I’ll share this with ~2,000 Advanced Placement Economics teachers on our listserve.

    Step by step, we’ll continue forward.

  6. OK, so robots, AI, etc. will obsolete many jobs at the bottom tier of the economy… leaving those people idle ? There are plenty of other work related items that many can help with, but in the end, a surplus of human effort will go un-needed, unemployed…and unpaid unless something new happens. The above could be done in a minimal fashion, with incentives built into such programs to help those who are able and willing to move up to more rewarding enterprises in society, but still, to avoid more Malthusian disasters like china, incentives must also be included to promote smaller families.

  7. If you want to fund a BI, the only way it can be done is this: eliminate income tax and replacing it with an automated payments tax. With GDP at $20T and Fed Tax Revenue at $4T, that is an effective 20% tax rate to the economy. Although, who actually pays this $5T Federal tax is of continuous debate.

    By replacing Income Tax with an Automated Payment Tax, you are now looking at $5 Quadrillion in payment transactions and would only need a tax of .001 (or .1%) to raise $5T in Fed Tax Revenue. This would be automatically collected at the Bank / Institution level, AUTMATICALLY, on all financial payments made through Banking, Brokerage, Clearing Houses, etc via electronic transaction processing.

    Poof: Simple, easy, fair, no more tax code, no tax filing, everyone pays same fair share easily and automatically. Imagine earning a $100k salary and only paying $100 is federal taxes, and the federal gov’t still raises the same tax revenue. Plz see

  8. Reblogged this on amnesiaclinic and commented:
    Very interesting proposals.

  9. […] Ellen Brown Writer, Dandelion Salad The Web of Debt Blog October 4, […]

  10. I’ve spent considerable time thinking on this topic. There are considerable obstacles in the way of any solution to reducing wealth inequality in the U.S. The first of which is the wealth themselves.

    A simpler taxation system will never get enacted — too many corporations and people make a living through the tax system. The same goes for a heavier tax burden placed on the wealthy — it wouuld never get enacted.

    Tax the robots? Which are owned by the capitalists… who refuse to let (or force) Congress do the right thing? Nope, not gonna happen there either.

    Frankly, I don’t see the plutocrats ever relinquishing control of our government, and so, with that fact firmly entrenched, how would you entice the oligarchs to help the bottom 3/4’s of society?

    You offer to make them even richer!

    Convince them that by either, as you say, QE our way into a higher velocity of money, thereby sending even more money into their capitalistic corporation coffers… Or, we could do something radical: Give people free money — but in the form of an Exchange Traded Fund.

    Give everybody shares in an ETF that is comprised of all the best corporation stocks, all the best federal-state and muni bonds, all the best utilities. Shares of this ETF *could* just be sold right now for $$$ which could be used for those who need cash. OR, some could be saved, or all could be saved. I’ve proposed the idea here if you’re curious:

    But essentially the premise is that the average American is NOT a CAPITALIST. They do NOT own the means of production. They are excluded from the growth of productivity, of technology. So, GIVE them ownership in the nation through this ETF: USAA United States of America for All.

    The wealth will love it! More $$$ for the companies. The little guy will love it, $$$ right now, or, an automatic investment in their future.

  11. […] authority, but lacks the political will.   (Also read From Ellen Brown’s 300+ blogs…😉       THE SOLUTION:(EIGHT WORDS)… A CAPITALISTIC ECONOMY WITH A HONEST CENTRAL BANK. […]

  12. […] has that authority, but lacks the political will.   (Also read From Ellen Brown’s 300+ blogs…😉       THE SOLUTION:(EIGHT WORDS)… A CAPITALISTIC ECONOMY WITH A HONEST CENTRAL BANK. THE […]

  13. If implementing Universal Basic Income results in greater health and well-being (more commonly termed a better way of living) for the people than if the policy was not enacted, then there should be absolutely no hesitation in moving forward with UBI. Humanity is free to do as it wishes on this Earth. There’s no Annunaki or Archons or Martians or anyone else in the universe stopping humans from doing whatever they want to make life better for this and future generations.

    By the way … Finally making wars of aggression illegal (punishing war criminals) might free up some substantial financing for UBI, make global military/weapons expenditures (>$1 trillion) unnecessary, and establish true peace on Earth.

    • Hey it worked in down and out Germany in 1933, under Hitler. He turned that country into a thriving powerhouse in less than three years. So did Lincoln. What are we waiting for? It is our only hope. We have tried war, war, war. Let ‘s try something smart for a change.

  14. I love you Ellen, but bills like Sb 805 and HR 1144 if changed to 0.5% of price of trades on the exchanges which the Tax Policy people at Brookings published a yearly trade value of $660 trillion we would have so much freaking money giving everybody $20K would use up most of the 3.3 trillion but would leave a trillion for other pressing problems like planting stuff to sequester co2.

  15. Dear Ms. Brown,

    I don’t know if universal income is a good idea, but government debt is certainly a bad idea. If we can afford to borrow from the Federal Reserve when it ‘prints’ money, then we can afford to eliminate the middle man by having the Treasury ‘print’ money without creating debt instruments. If we began ‘printing’ money to cover deficits, debt interest, and maturing debt, the government would eliminate all its debt in 30 years. With a 30 year time window, inflation would be mild, while freeing ourselves from tax farmers would be a fantastic gift to future generations.

    Blessed Be,

    Jerry D. Lammers

  16. Doesn’t the GDP already include the velocity of money in the GDP total and therefore there would be no increased tax revenue? The GDP is inflated and misused in that it fails to distinguish between passive and earned income. Passive income creates a wealth transfer whereas earned income participates in the creation of new wealth. Passive income should carry a larger tax burden.

  17. To add more credibility to this column and the notion of funding this program, formal documentation for the two links below would very helpful.

    I have been hunting for documentation of these two blog items. Anyone know of formal documentation?

  18. The monetary economics of UBI are solid if you wish to stabilize a constant growth economy. It is also entirely insane on a finite planet. A limited degree of sustainable economic growth is possible as our capabilities increase through the expansion of our scientific wisdom to create “more with less” as Buckminster Fuller suggested, but this is a time constrained growth that recognizes the truly finite nature of the Earth. The advertising driven demand of a debt based monetary economy that requires constant growth must also be abandoned for a human society that values health and well being over insane greed.

  19. […] How to Fund a Universal Basic Income Without Increasing Taxes or Inflation […]

  20. If you look up UN Swissindo ( you will see how a UBI will be funded very soon, starting in Indonesia and available to everyone.

  21. Thanks for this great article. I have long believed that economists generally overlook or underrate the velocity of money (“V”) as a driving force in any modern economy.

    As billionaire Nick Hanauer (among others) points out, he makes about 3,000 times more money than you or me — but he doesn’t buy 3,000 times more cars or pairs of pants.

    Generally, then, money that gets socked away has a velocity of ZERO.

    This doesn’t mean there’s no role or purpose or benefit to savings. Almost anything can be good in moderation. But current public policy slaps the whole crazy system wildly out of whack. Out of balance. (Think koyyanisqatsi, world out of balance.)

    Imagine if public policy were reframed around accelerating V up to (say) a certain specific target amount.

    If I recall, measuring true V is difficult. Stand-ins that imply but do not measure V, don’t reflect its real-world behavior and impacts.

    With the emergence of “big data” and artificial intelligence, for the first time we may have pragmatic ways to measure V at scale. This advance could enable “real V” to become a factor in public policy decisions for the first time.

    Remember: “Zero V” people and companies devastate the US economy, hurting us all. It’s time for this hard truth to become the basis of a moral, as well as fiscal, accounting.

    “High V” helps us all; “Zero V” zaps us all. Repeat. Make it your mantra. It needs to become a core piece of culture change, moral judgment, and especially voting behavior.

    High V candidates? Vote them in! Zero V? Vote them out! We cannot afford the luxury of tolerating them any longer.

    • Yes, but v requires spending more often and that’s precisely the current malaise across economies today. They [=most of us] are too strapped to afford spending beyond the necessary minimum. Most money ends up in the financial sector, as in repayments to banks. V after that is micro. The baby boomers, who are retiring [at 10,000 per day] and vacating the work force are really the main cohort supporting any discretionary spending. But it’s not enough and the boomers are a short term solution. The growing economy is in health care mostly not industry. The Fed neglects essential infrastructure etc due to political stupidity. venal too.

  22. […] How to Fund UBI Without Increasing Taxes or Inflation […]

  23. […] Ellen Brown does a good job at laying out the case for a universal basic income in How to Fund a Universal Basic Income Without Increasing Taxes or Inflation. […]

  24. […] crisis; and this could be done without triggering hyperinflation. See my earlier articles here, here and […]

  25. […] crisis; and this could be done without triggering hyperinflation. See my earlier articles here, here and […]

  26. […] Alternatively, the government could fund tuition costs and debtor relief with a form of “QE for the people.” Instead of buying mortgage-backed securities, as in QE1, the Fed could buy SLABS and return the interest to students, making the loans effectively interest-free (as were the $16+ trillion in loans made to the largest banks after the 2008 crisis). QE that targeted the real economy could address many other budget issues as well, including the infrastructure crisis and the federal debt crisis; and this could be done without triggering hyperinflation. See my earlier articles here, here and here. […]

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