Guaranteed Basic Income Series: #2
Beginning in 2023, District households whose adult members work but aren’t paid enough to make ends meet will receive a monthly guaranteed basic income payment. The income boost is the result of a new program created by the DC Council, thanks to the leadership of Ward 6 Councilmember Charles Allen. The exact dollar amount will vary by household size and income, with roughly half of beneficiaries being children. Stipends would start at up to $168 per month for families with three children and increase to up to $476 per month by 2026. Nearly 35,000 District households, which include 50,000 tax filers and 58,000 children, would benefit from the program.
Even a family with three children, earning up to $57,414 a year, typically struggles to afford basic necessities. For instance, the average cost of a two-bedroom apartment in the District is approximately $2,950, which is increasingly out of reach of working families. The influx of $168 in 2023 to $476 in 2026 (for a family with three children) will enable families to help cover the cost of rent or pay for commuting expenses, school supplies, medical care, and other items that are essential but often sacrificed.
Eligibility for the guaranteed basic income payment is based on the federal earned income tax credit (EITC) program, although it is a distinctly different benefit. The key difference is that the traditional EITC is dispersed annually, while these will be additional monthly payments that put money in the pockets of working families so they can pay for needs as they arise. The continuing impact of racism in the District means financial challenges disproportionately affect people of color--68% of EITC recipients in the District are Black and 12% are Latinx. Creating guaranteed basic income would represent an important step toward racial equity in the District.
Obstacles to Overcome and Potential Solutions
Families Must File Taxes
To benefit, families with an income low enough that they are not otherwise required to file tax returns would have to do so anyway. As we noted in July when discussing forms of guaranteed income, many families who are eligible for guaranteed basic income face logistical, linguistic, or other challenges with filing tax returns.
The IRS estimates that roughly a quarter of eligible DC households do not file tax returns and therefore do not claim earned income tax credits, meaning that roughly 20,000 families are missing out on income. The bill that created the guaranteed basic income program grants the Mayor permission to fund publicity and education about the credit through local nonprofits. The extent and effectiveness of this outreach will be vital to the benefit's success.
This is similar to the new monthly federal child tax credit payments that started going out in July. However, unlike with this new District benefit, for the new monthly federal child tax credit payments that started hitting residents’ bank accounts in July, families who did not file 2019 or 2020 tax returns can still get those monthly child tax credit payments by filling out the form for non-filers. In spring 2021, the US Department of Treasury estimated that 5,725 DC children are in families who still must complete the form to receive this money. More than half of these children live in five high-poverty zip codes. Getting the word out to all eligible households and making sure they understand and apply for the benefit is an essential step toward enabling families to achieve financial stability.
Eliminate Parental Social Security Number Requirement
Many mixed immigration status families who pay taxes are excluded from the federal EITC program. Six states, including neighboring Maryland, have passed legislation expanding their EITC programs to taxpayers without a social security number. The Center on Budget and Policy Priorities estimates that making this change would enable roughly 3,500 DC tax filers to participate in the EITC program.
It’s important to note that, while not currently eligible for the new guaranteed income program linked to the EITC, mixed immigration status families are eligible for the federal child tax credit as long as at least one parent has a tax ID and at least one child has a social security number.
In addition to filing taxes and having a social security number, in order to receive the guaranteed basic income, eligible families must have at least some earned income over the course of the year. Unfortunately, even in good economic times, thousands of DC children live in families where no adults work, with higher numbers at times when the labor market is tough. These families also need support, particularly if they are not working because they are obtaining education or training required for better job opportunities.
Despite these areas for additional improvement, the new guaranteed basic income program will be a big boon for families. As the District works through implementation over the next couple of years, it should consider how to make the program more inclusive, such as increasing comparable benefits for those who are not working, and expanding the definition of work to include education or training.
In other good news, the American Rescue Plan allowed young adults to access the EITC in new ways. Specifically, it expanded the federal EITC to include young adults aged 19-24 who do not have children and who are not in school (those in school may be counted as a dependent for their family’s EITC calculation). In addition, qualified foster youth and homeless youth aged 18-24 can now claim the credit even if they were students.
The growing income and wealth gaps that have occured over the last several decades, and only accelerated during the pandemic, are a stinging moral indictment of an economy that serves those at the top. The District’s most recent budget, which advances a more progressive and racially just tax code, and launches bold and innovative programs like a guaranteed basic income for working families, will help address some of these inequities.
Rachel Metz is DC Action's Research and Data Manager