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

Rich Pedroncelli/AP PhotoMayor Michael Tubbs of Stockton, California, during an interview on August 14.

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 $US500, no strings attached.

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

Tubbs hopes the monthly payments will help lift some Stockton residents out of poverty. In 2012, the city became the largest in the US at the time 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 concept argue that cash stipends reduce the incentive for people to find jobs and may encourage recipients to make more frivolous purchases.

“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

The Democratic presidential candidate Andrew Yang has made basic income a prominent part of his platform. Yang says that if elected, he would give $US1,000 a month, or $US12,000 a year, to every adult US citizen over 18. He calls this basic-income plan the “Freedom Dividend.”

But his proposed program would require some Americans to choose between the monthly stipend and their existing needs-based assistance. (Retirement benefits like Social Security would be preserved in all cases, and veterans and differently abled citizens would continue to receive their current benefits alongside a basic income.)

Andrew YangScott Morgan/ReutersThe Democratic presidential candidate Andrew Yang at the Iowa State Fair.

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.

“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 were working toward a similar goal.

“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 tax that would fund a $US500 monthly stipend for every American earning $US50,000 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 $US500 a month to every household making $US100,000 or less.

“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, or $US640, a month – but they had to forgo some other benefits 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.

Stockton basic income debit cardRich Pedroncelli/AP PhotoParticipants in Stockton’s basic-income trial receiving their monthly payments on a debit card provided by the city.

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 about 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.

Sen. Kamala Harris of California – who most people thought Tubbs would endorse in the presidential race until she dropped out – proposed a policy that would to deliver up to $US250 a month to single Americans and up to $US500 a month to married couples. She advocated 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 $US3,000 a year and couples had to earn at least $US6,000 a year to get the full benefit. Those without any income at all wouldn’t receive the money.

Stockton basic income recipientRich Pedroncelli/AP PhotoSusie Garza, a participant in Stockton’s basic-income trial, used some of the cash to finance her dog’s surgery.

The act is not so different from the current earned income tax credit, which delivers a tax credit to low- and moderate-income working Americans. That policy has been criticised for favouring adults with children, since they are eligible for more money. For 2019, for instance, single people can receive a credit of up to $US529, while families with three or more kids can receive up to $US6,557. 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 says 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.

“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 hadn’t seriously entertained a basic-income program yet had 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, the CEO of the nonprofit Jain Family Institute, told Business Insider.

The problem, according to Tubbs, is that many Americans don’t recognise 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 $US500 per month. He says the program is a success so far.

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 $US33 per month – part of one of the largest basic-income programs in the world

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