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How Much Does Basic Income Cost? Modelling Basic Income as Universal Life Annuity

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  • Gan Wee Chung

Abstract

The cost of basic income is typically estimated for a particular year. However, to assess the financial feasibility of basic income, it is also important to consider how much basic income will cost in the future. This is especially important in countries experiencing an ageing population, where the proportion of workers is expected to shrink. This article considers basic income as a universal life annuity and develops two models based on actuarial concepts to estimate the flat tax rate required to finance basic income. The first model considers the cost of basic income over the lifetime of the current population and the second model additionally considers changing population dynamics. The proposed models are conceptually simple, providing a straightforward way to assess the financial feasibility of basic income. Using Singapore data, the models show that the monthly cut-off income separating net contributors and net recipients is around $2710 and benefits around 39 % of adult residents. A tax rate of around 22 % is required to support a basic income of $600.

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  • Gan Wee Chung, 2019. "How Much Does Basic Income Cost? Modelling Basic Income as Universal Life Annuity," Basic Income Studies, De Gruyter, vol. 14(2), pages 1-10, December.
    • Handle: RePEc:bpj:bistud:v:14:y:2019:i:2:p:10:n:4
    DOI: 10.1515/bis-2019-0014
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