A 29-year-old mayor is giving his city's poorest residents $500 per month. He thinks his policy could work on a national scale.

Michael Tubbs

In California's Central Valley, a small city is testing a big idea. Since February, 125 residents of Stockton have been getting monthly payments of $500, no strings attached.

It's a trial of universal basic income that's set to last for 18 months. With about eight months left to go, the mayor of Stockton, 29-year-old Michael Tubbs, told Business Insider that the experiment is showing early signs of success. Advertisement

Tubbs hopes the monthly payments will help lift some Stockton residents out of poverty. In 2012, the city became the largest in the US to file for bankruptcy. It's no longer bankrupt, but about a quarter of Stockton's population still lives below the federal poverty line.

Early data from the trial shows that the basic-income recipients have so far spent about 40% of their stipends on food and another 24% on sales and merchandise, like trips to Walmart or dollar stores. Another 11% went to paying their utilities, and about 9% went to buying gas and repairing their cars.

For Tubbs, those findings support the idea that people who get a basic income spend the money wisely, on necessities. But critics of the basic-income concept argue that cash stipends reduce the incentive for people to find jobs and may encourage recipients to make more frivolous purchases.
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"When I first announced we were doing this pilot almost two years ago now, people thought of it as scary or crazy," Tubbs said. "It has now become mainstream in a way. People are really debating its merit. So from that nature, I think we're very successful."

Eventually, he said, basic income could be a way to reduce poverty across the US. Here's how Tubbs thinks a national basic-income program could work.

Tubbs doesn't support Andrew Yang's plan

Democratic presidential candidate Andrew Yang has made basic income a prominent part of his platform. Yang says that if elected, he would give $1,000 a month, or $12,000 a year, to every adult US citizen over 18. He calls this basic-income plan the "Freedom Dividend."Advertisement

But his proposed program would require participants to forgo their existing social-security benefits (with the exception of retirement benefits). Veterans and differently abled citizens would continue to receive their current benefits alongside a basic income.

Andrew Yang

Many basic-income proponents, however, don't think that residents should have to choose between stipends and existing welfare programs (also known as "conditional" income policies). Tubbs is among them. Advertisement

"I would oppose any policy that will get rid of the existing safety net and replace it with a cash transfer," he said.

As a result, Tubbs has been critical of Yang's plan. Earlier this week, he surprised many of his constituents by endorsing Michael Bloomberg, the former mayor of New York City, for president.

But Tubbs acknowledged that he and Yang are working toward a similar goal. Advertisement

"The timing of his ride is great because he's not just running off something that's theoretical," Tubbs said. "Stockton actually grounds his talking points to something that's real and tangible."

Could a national basic-income policy resemble the pilot in Stockton?

Tubbs has ideas about a few national policies that would resemble his pilot in Stockton.

One is a small tax that would fund a $500 monthly stipend for every American earning $50,000 or less. (Tubbs didn't specify who or what that tax would apply to.) Another possibility, he said, would be to repeal the Trump administration's Tax Cuts and Jobs Act, which slashed tax rates for many individuals and corporations, and use that recovered revenue to fund a basic-income policy that gives $500 per month to every household making $100,000 or less. Advertisement

"There are a lot of ways to get there," Tubbs said. "I've just been very clear that I don't think people should have to opt out of existing benefits to opt in."

The type of conditional policy Tubbs doesn't support was recently tested in Finland. For two years, nearly 2,000 of the nation's unemployed residents were given a regular monthly stipend of 560 euros ($640) per month - but they had to forgo some other benefits in order to receive the money. The experiment was declared a flop. While the US has never conducted a nationwide universal basic-income trial, it has tested a few welfare experiments since the 1960s.Advertisement

Stockton basic income debit card

From 1968 to 1982, the US experimented with a negative-income tax, which allowed low-income citizens to receive money from the government instead of paying taxes. The trials ultimately involved around 9,000 citizens in New Jersey, Iowa, North Carolina, Indiana, Seattle, and Denver. The results showed a decrease in employment by the end of the program, but the experiments were considered too small to generate significant conclusions.

Since then, a few politicians have voiced support for a national basic-income policy in the US. The Green Party made it a central plank of its platform in 2010.Advertisement

California Senator Kamala Harris - who most people thought Tubbs would endorse in the presidential race until she dropped out - proposed a policy that would to deliver up to $250 per month ($3,000 per year) to single Americans and up to $500 per month ($6,000 per year) to married couples. She advocated for the legislation on the campaign trial.

Harris' LIFT the Middle Class Act, however, would not apply to the nation's poorest residents, since single people had to earn at least $3,000 per year and couples had to earn at least $6,000 per year to get the full benefit. Those without any income at all wouldn't receive the money.

Stockton basic income recipient
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The act is not so different from the current earned income tax credit (EITC), which delivers a tax credit to low- and moderate-income working Americans. That policy has been criticized for favoring adults with children, since they are eligible for more money. For 2019, for instance, single people can receive a credit of up to $529, while families with three or more kids can receive up to $$6,557. All of those people have to be employed to be eligible.

Tubbs said one way to provide "an income floor for everyone" would be to expand the definition of work under the EITC to include people like caregivers and students.

Tubbs said the US isn't ready for basic income yet

Tubbs does not think a basic-income policy would ever be considered under the current administration. Advertisement

"I do think the majority of Americans want to get there," he said. "But I think national leadership - particularly in the White House and the party that controls the Senate - isn't there yet."

In a conversation with Business Insider in April, Tubbs said the reason the US hasn't seriously entertained a basic-income program yet has little to do with previous trials - many of which have shown the approach has promise as a poverty-alleviating tool. "The funny thing about basic income is that it has to be one of the most tested welfare policies in history that hasn't in fact been implemented," Michael Stynes, CEO of the nonprofit Jain Family Institute, told Business Insider. Advertisement

The problem, according to Tubbs, is that many Americans don't recognize that one person's economic mobility can benefit another.

"If data just moved policy, our world would look different," he said. "It's really the storytelling and the emotion that oftentimes lead policy."

Read more basic income coverage:

A 29-year-old mayor is giving his city's poorest residents a basic income of $500 per month. He says the program is a success so far.Advertisement

One of the world's largest basic-income trials, a 2-year program in Finland, was a major flop. But experts say the test was flawed.

A Brazilian city is giving a third of its residents $33 per month - part of one of the largest basic-income programs in the world

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