Legislation in Iowa Bans Universal Basic Income Programs Amidst National Debate

A version of this article appeared in Real Clear Markets.

The solution for reducing poverty does not reside in UBI programs. The best path to reduced welfare is the ready availability of jobs.

Persuaded that universal basic income (UBI) programs would do more harm than good, the Iowa Legislature has passed a bill to ban such initiatives at the local level.  As the debate over such programs continues across the country, observers of the UBI experiment can move another state into the opposition column.

During the COVID-19 pandemic, states and local governments received an unprecedent windfall of federal dollars, and policymakers seized upon the funding for experiments to address poverty. With a need and a desire to spend the unexpected money, officials at all levels of government added new variations to the list of guaranteed income programs that have been proposed throughout American history.

One of the first local programs in the country appeared in Stockton, California, and the idea quickly expanded when Mayors for a Guaranteed Income was founded in 2020, followed by Counties for a Guaranteed Income in 2023. More than 150 guaranteed income pilot programs have popped up across the country, and at least 70 are currently active across 25 states. At the state level, the Minnesota legislature is currently considering a UBI program.

Seeking their own approach to address poverty by redistributing wealth, local governments in Iowa recently intensified the debate. The Hawkeye State’s largest county (Polk), and several cities in the Des Moines metro area launched UpLift, a UBI pilot program, with a total cost of $2.65 million. UBI proponents argue it offers a promising means of alleviating financial insecurity and promoting stability with minimal economic distortion. Critics, on the other hand, voice concerns about funding, sustainability, and unintended consequences on workforce participation.

Evidence from the COVID era and its inflationary aftermath is not encouraging. During the pandemic, generous direct stimulus payments from the federal government kept many individuals from working, and businesses continue to struggle to find workers to this day. The flood of money that applied upward pressure on worker pay has driven prices toward the sky. A UBI program would arguably further intensify these effects and make it even more difficult to unwind from the current levels of inflation.

UBI programs also exacerbate budgetary strains, especially in local government, where the most despised tax of all, property tax, is the main funding source. Backers of UBI programs lean on the fact recent experiments were merely pilot programs funded with one-time money, but the point of a pilot is to set a path for a full policy. If UBIs are allowed to become permanent, they will put massive pressure on budgets whether funded at the state or local level.

With the impact of pandemic-era programs at the top of their minds, Iowa lawmakers felt compelled to respond to UBI programs commencing at the local level.  Iowa State Senator Scott Webster has argued there is “ no way property tax dollars would ever be able to hold up these types of programs and [legislators are] fearful some towns would think they could.” Iowa has the tenth-highest property taxes nationwide, and legislators are reluctant to allow any new programs that could increase the burden on homeowners.

Iowa’s legislation, recently signed into law by Governor Kim Reynolds, prohibits local governments from implementing their own UBI programs and joins Iowa with a group of conservative states that have taken recent action. Idaho Governor Brad Little signed a bill in late March prohibiting counties, cities, agencies, boards, and any other political subdivision of the state from administering basic income programs. South Dakota lawmakers enacted a similar piece of legislation, as did their Arizona counterparts, although that attempt fell to the veto pen of Governor Katie Hobbs. The legislatures of Illinois and Mississippi have also considered preemption policies.

The solution for reducing poverty does not reside in UBI programs; government-run poverty programs do not have a history of success. President Lyndon B. Johnson’s Great Society “war on poverty,” as a case in point, was a failure. During the 1990s, many Republican governors demonstrated the best path to reduced welfare is the ready availability of jobs, which shrinks welfare rolls. That is, the best approach to creating financial security and reducing poverty is economic opportunity.

Like socialism, UBI offers only a false hope of financial security. Iowa has become a national leader in pro-growth fiscal policies that are unleashing Iowans’ drive and ingenuity. Reducing tax and regulatory burdens while ensuring workers are not hindered by restrictive occupational licensing requirements is a policy that encourages economic growth. Declining the UBI experiment prevents an activist fantasy from strangling this genuine hope.

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