Can Universal Basic Income Really Save Us from Automation?

Written By dKay in Maine

Editor’s Note: This post is a focused version of my longer essay, The Hidden Costs of AI: What We Lose When We Over-Automate. Here, I look only at Universal Basic Income (UBI) as a response to automation. If you’d like the broader context—including how AI affects cognition, relationships, and jobs—you can read the full version here.

As machines and algorithms handle more of the jobs people once did, the big question becomes: how are we supposed to make a living? Supporters of Universal Basic Income (UBI) say the answer is simple—guaranteed payments that provide a steady baseline. In this article, I dig into what UBI actually promises, the price tag attached to it, and whether it could hold up in a future shaped by automation.

Figures like Elon Musk and Geoffrey Hinton argue that the sheer productivity gains from AI could make some form of UBI unavoidable. Others take the idea even further. In philosophical frameworks such as cognitarism, the claim is that once cognition itself—through AI—becomes the core engine of production, income can no longer be tied to traditional work.

Even a modest UBI is enormous at the national scale. A commonly cited figure is that a $1,000/month UBI would cost about $3.8 trillion per year. That estimate assumes payments to every U.S. resident, including children. If the program were restricted to adults only—about 260 million people—the cost would be closer to $3.1 trillion annually. Either way, the scale is enormous: between 10% and 13% of GDP, depending on design.

And because I live in Maine, I have to look at it from this angle as well. The often-touted UBI figure of $1,000 per month (about $12,000/year) may sound generous—but it’s far below the real cost of living in Maine. According to MIT’s Living Wage Calculator, in 2025, a single adult in Maine actually needs around $48,292/year to cover basic expenses. GOBankingRates estimates that a minimally comfortable lifestyle requires $108,287/year, while SmartAsset places the ‘comfort’ benchmark closer to $97,000/year.

With Maine’s average annual salary landing just north of $70,000, many people still fall short of even the modest benchmarks. Now, envision being someone replaced by AI and unable to find a new job. UBI would put $12,000/year in your pocket, 75% short of the minimum/year to cover basic expenses.

And this isn’t just a Maine problem. Across all 50 states, the median household income is below the cost-of-living threshold, according to GOBankingRates, as you can see in the table below.

However, even if UBI sounds appealing in theory, the central question remains: who will pay for it? Below, I’ll outline the main funding options at a high level.

  1. General taxation:

    Higher income or sales taxes could fund UBI, but this risks placing a disproportionate burden on the same lower- and middle-class taxpayers who are already vulnerable to automation-driven job losses.

    Because broad-based taxes like VAT or sales taxes apply to what people spend, they fall hardest on those with the least to spare. Lower-income households often spend nearly all of what they earn just to cover their basic needs, so a tax on spending takes up a much larger share of their income.

    People with higher incomes have more room to save or invest, so less of their paycheck gets eaten up by sales taxes. That’s why the OECD points out these kinds of taxes hit lower-income households harder when you look at them against income, even if they look more even when measured against spending.

    Now, here’s the kicker: even a 10% VAT wouldn’t get close to paying for a national UBI. In 2023, Americans spent about $19 trillion on goods and services. Taxing that at 10% would bring in around $1.9 trillion. Huge, yes — but still only about half of what UBI would cost in a single year.

    And remember, this wouldn’t replace existing sales taxes. It would sit on top of them. In Maine, the state sales tax is 5.5%. Add a 10% VAT, and you’re suddenly looking at 15.5% tax on most purchases. And Maine isn’t even the worst case. In states like Tennessee or Louisiana, where state and local sales taxes already push 9.5% and 10% respectively, adding a VAT would bring the total to around 20% every time you check out.

    So while a VAT could help raise money, it’s nowhere near enough on its own, and it will be felt mainly by those who already struggle to make ends meet. That raises a bigger question: how much room does the U.S. even have to raise taxes overall? In 2023, the U.S. tax-to-GDP ratio was approximately 25%, compared to an OECD average of around 34%. On paper, that gap shows there’s fiscal space to collect more—other advanced economies routinely collect a larger share of their GDP in taxes without collapsing under the weight of it. The U.S. could, in theory, do the same. In practice, moving even a few percentage points of GDP into new revenue is politically very difficult—and the way it’s designed matters enormously for who ends up paying the bill.

    Of course, debates over cost only tell part of the story. To see how UBI plays out in practice, it helps to look at real-world experiments.

    Finland actually tested the idea of UBI. From 2017 to 2018, it provided 2,000 unemployed people with €560/month, funded through regular tax revenues. The results were mixed: participants reported less stress and higher well-being, but employment levels remained largely unchanged, and policymakers ended the trial, citing its limited design and the high costs associated with scaling it.

    In the U.S., Andrew Yang’s 2020 “Freedom Dividend” didn’t get off the ground, but it was the first time UBI entered the mainstream presidential debate. His plan proposed $1,000/month for every adult, funded mainly by a new 10% VAT alongside program consolidation. Independent analyses found that the approach would fall far short and risk hitting lower-income households hardest unless carefully offset.

    The risk is clear: unless carefully designed, general taxation could leave lower- and middle-class taxpayers funding their own displacement — paying higher taxes to finance UBI while already struggling with job loss or wage stagnation.

  2. Wealth or “robot” taxes

    Bill Gates popularized the idea of a “robot tax” in 2017: if a human worker pays income tax, a robot that replaces them should be taxed similarly, with the proceeds used to fund training or caregiving jobs. It never moved past the discussion stage, but it framed automation as something that should share its gains.

    Recent precedent shows how fragile such taxes are under corporate pressure. Seattle’s 2018 “head tax” on large employers—designed to fund homelessness services through a $275/employee tax on large firms—was repealed within a month after Amazon and others lobbied fiercely and threatened to halt expansion plans. In Europe, France and others adopted Digital Services Taxes (DSTs) aimed at Big Tech; the U.S. threatened tariffs and negotiated rollbacks/delays. Meanwhile, platforms visibly passed costs on: Amazon added a 2% surcharge to UK sellers, Google raised ad rates in the UK, Austria, and Turkey in line with local DSTs.

    Here’s where the hypocrisy shows. While the Trump administration fought DSTs abroad, calling them unfair and anti-consumer, Maine just adopted its own DST-lite: a tax on streaming services like Netflix and Hulu. As with European DSTs, the cost doesn’t fall on the corporations but on residents, who see their monthly bills rise. Consumers have no veto power here either. It’s a reminder that while national politicians rail against one form of digital taxation, local governments are happy to adopt similar measures at home—and the impact on ordinary people is the same.

    And that’s the larger problem with “robot” or digital service taxes: who really pays? While these policies are pitched as making corporations and the wealthy “pay their fair share,” history shows the costs are often shifted down to the very people such programs are meant to help. Whether through higher subscription fees, increased prices, or reduced investment, the practical burden rarely stays at the corporate level.

    This isn’t just about taxes. History shows that even major regulatory frameworks, such as the Dodd-Frank Act, have been rolled back after sustained lobbying efforts, with the 2018 reforms loosening oversight for mid-sized banks. After the 2008 financial crisis, banks, mutual funds, hedge funds, and credit card companies, among others, poured billions into lobbying against the Dodd-Frank reforms. A decade later, Congress gave in on some of the pressure. In 2018, it raised the threshold for “enhanced supervision” from $50 billion to $250 billion in assets. It’s a reminder that even landmark laws can be reshaped once powerful industries exert enough influence.

    The pattern is clear: with sufficient lobbying funds, corporations often prevail. This raises a dangerous question: if UBI is funded through corporate or wealth taxes, what happens when those corporations succeed in gutting or dodging the system? Without robust safeguards — and ideally international coordination — citizens could end up dependent on a revenue stream that’s politically reversible at the stroke of a pen.

  3. Redirected welfare spending

    The idea behind this is to simplify dozens of aid programs into a single universal payout—but most dollars already go to beneficiaries, and shifting costs can push burdens onto states (and indirectly, taxpayers).

    On the surface, the idea of consolidating existing welfare programs into a single universal payment may sound promising. Less paperwork and fewer agencies could mean that more money would go directly to the people. And a look at the numbers is promising: In fiscal year 2024, Social Security alone cost approximately $1.5 trillion, Medicare and Medicaid together roughly $2 trillion, and SNAP another $99.8 billion. Combined, that’s roughly $3.6 trillion—nearly the same as the estimated $3.8 trillion annual cost of a $1,000/month UBI for every U.S. resident.

    But the numbers are misleading. These programs serve very different purposes.

    • Social Security is retirement and disability insurance. Eliminating it to fund UBI would strip away the guaranteed pensions and disability payments millions rely on after decades of payroll tax contributions.

    • Medicare and Medicaid provide healthcare coverage. Replacing them with cash would leave seniors and low-income families paying out of pocket. With U.S. healthcare spending averaging about $13,500 per person annually, a $12,000 UBI wouldn’t even cover medical costs.

    • SNAP ensures targeted food security, which cash may not replicate as effectively, as the recipients could spend cash on anything they deem more important than food.

    The per-capita math also doesn’t balance. Redistributing $3.6 trillion across all ~340 million U.S. residents would yield about $10,600 per person per year, still less than the $12,000 UBI benchmark. In other words, even if you wiped out Social Security, Medicare, Medicaid, and SNAP, you’d still fall short—and you’d create new crises in healthcare, retirement, and food security.

    Just take a look at SNAP. Its growth over the decades is largely attributed to structural shifts. In 1970, the program’s benefits totaled approximately $577 million (roughly $4.5 billion in today’s dollars, adjusted for inflation). By 2024, that figure had climbed to above $100 billion. The increase stems from several factors: more people receiving benefits, broader eligibility, repeated boosts during recessions, and, most recently, the 2021 update to the Thrifty Food Plan, which raised benefits by approximately 21% on a permanent basis. What hasn’t changed is efficiency. SNAP still spends the vast majority of its budget directly on benefits—over 90 cents of every dollar goes straight to households, with the small remainder covering things such as eligibility checks and fraud prevention.

    And real-world attempts to simplify benefits are rocky. The UK’s Universal Credit, which consolidated six different welfare programs, was plagued by payment delays, IT glitches, and hardship for claimants. The National Audit Office concluded the system wasn’t delivering value for money. The lesson: streamlining often creates new complexity in practice.

    There’s also a deeper equity issue. Vulnerable groups, such as people with disabilities, older people in long-term care, or families with housing insecurity, often need tailored support. A one-size-fits-all payment risks leaving those with the most specific needs worse off.

    So, while redirecting welfare spending is politically appealing, it rarely generates enough funding to sustain a UBI—and here too, we have to ask: who really pays? All of these programs are already taxpayer-funded. Redirecting them into a universal check doesn’t make the money free—it simply repackages existing burdens. For lower- and middle-income households, that can mean losing targeted support while still paying the taxes that keep the system afloat. In other words, “redirecting welfare” often risks recycling costs back onto the very families who are most at risk of being left behind.

  4. Sovereign wealth funds/dividends

    Modeled after Alaska’s oil dividend, governments could build public funds from automation profits or national resources. This gives everyone a stake in collective wealth, but requires careful management.

    The Alaska Permanent Fund Dividend (PFD) is the U.S.’s closest brush with UBI. Since 1982, it has paid all state residents an annual check from oil revenues. However, the yearly payouts are volatile: $3,284 in 2022 (including a special energy relief payment), $1,312 in 2023, and $1,702 in 2024—yet, nowhere near the $12,000/year UBI benchmark. That volatility shows both the appeal and the fragility of tying income to resource markets.

    Norway’s Government Pension Fund Global (GPFG)—now worth nearly $2 trillion—shows what success looks like: it invests oil revenues abroad, follows a strict fiscal rule (spends only ~3% of the fund’s expected real return annually), and is guided by an independent Council on Ethics. These structures insulate it from political meddling and ensure long-term stability. It funds public services and stabilizes the economy without being raided for short-term goals.

    But many other resource-based funds have failed. Venezuela’s oil wealth funds effectively collapsed under corruption and mismanagement, leaving citizens worse off than before. The Carnegie Endowment and the IMF both note that transparency and the rule of law are the main determinants of whether sovereign wealth funds become sustainable public assets or political piggy banks.

    Dividends can give citizens a direct stake in national prosperity, but the governance risk is real: without safeguards, the “dividend” can vanish as quickly as the revenue it relies on.

    And here again, the fairness question matters: who really pays when these funds fail or revenues dry up? In boom years, citizens enjoy generous dividends. In bust years, payouts shrink or vanish — but the cost of mismanagement doesn’t disappear. Residents may face service cuts, higher taxes, or inflation when governments raid funds to cover shortfalls. In other words, without careful governance, the “shared wealth” model can leave ordinary citizens carrying the burden of political failures while elites benefit.

  5. Value-added taxes (VAT) on AI/automation

    VATs are a workhorse of global tax systems, already accounting for about 21% of total tax revenues across OECD countries. They are relatively easy to administer, hard to evade, and raise large sums. That’s why Andrew Yang leaned heavily on a 10% VAT to fund his proposed “Freedom Dividend.”

    But VATs are also politically toxic in the U.S. and regressive without design tweaks. Lower-income households spend a greater share of their income on consumption, so a VAT hike hits them harder. Many European countries mitigate this issue with rebates, zero-rating of essentials (such as food), or income-based credits; however, these measures can complicate the system.

    One practical advantage over the U.S. sales tax system is transparency: in Europe, VAT must be included in the sticker price by law. The price you see on the shelf is what you pay at the checkout. By contrast, U.S. consumers see sales tax added at the register—a reminder that while VAT is often criticized, it can at least be more straightforward for shoppers.

    But the key question remains the same as with digital taxes: who really pays? While VAT is formally levied on businesses, it is almost always passed through to consumers. That means the very people UBI is intended to protect—especially lower- and middle-income households—would shoulder a disproportionate share of the cost unless careful offsets are built in. Politicians often speak loudly about tackling inequality, yet when it comes to revenue, they rarely shy away from regressive instruments that shift the burden downward.

    France and Germany have both debated adjusting VAT to fund social programs, but VAT increases are deeply unpopular because they are highly visible at the checkout counter. In a UBI context, unless carefully designed with credits or rebates, a VAT could end up undermining the very equity goals it was supposed to advance.

  6. Private sector participation

    Another idea is to make the companies driving automation share the rewards. That could mean mandatory profit-sharing, or even giving the public a direct stake in AI-focused firms. It wouldn’t be easy to push through politically, but the appeal is clear: if technology is replacing jobs, its profits should help support the people who are affected.

    Some argue that if corporations are driving automation and reaping its profits, they should share directly with the citizens displaced. Proposals range from mandatory profit-sharing to public ownership stakes in large tech firms, or even “data dividends”—compensating people for the value created by their data. California’s governor floated such an idea in 2019, though it never moved forward.

    The math, however, shows the limits. In 2024, the five most profitable U.S. tech firms—Apple ($93.7B), Microsoft ($88.1B), Alphabet ($100.1B), Meta ($62.4B), and Amazon ($59.2B)—reported combined net income of about $403 billion. Even if the government skimmed 5% of those profits (≈$20 billion), spread across ~260 million U.S. adults, the payout would be around $75–$80 per person per year—barely a drop in the bucket compared to a $12,000/year UBI.

    And even raising that kind of money isn’t straightforward. When the UK introduced a windfall profits tax on North Sea oil and gas companies in 2022, several firms cut or redirected investment abroad—a reminder of how quickly corporations can restructure to blunt national taxes.

    That’s why some point to international coordination as the only way forward. The OECD’s 15% global minimum corporate tax, now rolling out, is one example of what anti-avoidance looks like in practice. It’s expected to raise about$150 billion annually worldwide. However, even if the U.S. captured a generous share, that would still cover only a small fraction of the $3.8 trillion needed annually for a national UBI.

    To me, it seems clear that the big risk is avoidance: if profit-sharing or public stakes aren’t international in scope, firms can simply shift profits offshore, restructure to dodge obligations, or lobby governments into watering down rules.

    So, while corporate participation can align incentives—tying citizen welfare directly to automation-driven profits—the scale is nowhere near enough to fund a full UBI. And here again the question emerges: who really pays?

    History shows that even when governments aim taxes at corporations, the costs rarely stay there. When the UK introduced a 2% digital services tax, Amazon and Google both passed the cost straight through—Amazon by adding a surcharge on sellers’ fees, and Google by raising ad rates in line with the tax. Similar pushback followed the UK’s 2022 energy windfall tax, where companies warned they would scale back investment or, as researchers suggest, shift costs to others in the chain, potentially including consumers at the end of the chain. They tend to resurface in higher prices for consumers, reduced wages, or cuts to investment. In other words, the shortfall would almost certainly be passed on to taxpayers and hit those who are least able to bear it—the lower- and middle-class households.

Each model has trade-offs. Critics warn that UBI could become a risky crutch—politically unstable, prone to underfunding, or even used as a substitute for real structural reforms. Mo Gawdat, former Google X executive, cautions that UBI on its own may entrench inequality and dependency by concentrating wealth and power at the top, while overlooking the need for reskilling and meaningful human opportunities.

UBI may one day play a role as a buffer against AI’s disruptions, but it cannot be a silver bullet. Unless tied to broader reforms—such as education, skill development, and fairer wealth distribution—it risks becoming a band-aid over a widening wound.

The Price of a Fragile Fix

Universal Basic Income is often framed as the answer to automation’s disruption: a way to replace lost wages with guaranteed support. But the debate over UBI shows what’s at stake. Replacing lost wages with public payments could cost trillions of dollars each year, forcing difficult choices about who pays and how. Without careful design, those costs fall back on the same households already under pressure—through higher taxes, higher prices, or weaker safety nets.

And even if the money were raised, there’s another problem: the numbers don’t add up. A widely proposed UBI of $1,000 a month—$12,000 a year—sounds helpful, but it falls far short of the cost of living. In Maine, for example, a single adult needs closer to $48,000 a year to cover basic expenses. That gap makes UBI more of a supplement than a solution.

UBI may soften the economic shock of automation, but it cannot, on its own, protect the qualities that give work and community their meaning. As I explore in the companion article, AI itself raises risks for our thinking, our relationships, and our jobs. UBI can cushion the impact, but without broader reforms—such as reskilling, fairer wealth distribution, and stronger social systems—it risks being a temporary patch rather than a lasting solution.

dKay in Maine
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When AI Does Too Much: How Over-Automation Affects Our Minds, Lives, and Work