Unconditional Basic Income in Portugal: How Can We Afford It?

Abstract

We present an implementation proposal of an Unconditional Basic Income (UBI) for Portugal that does not consider second-order effects. We argue that the implementation of a first step towards UBI (an Unconditional Income with a lower amount) not only is politically more feasible than a complete implementation, but also allows for a better estimation of the economic consequences of each consecutive step. We present an implementation proposal based on Pigouvian taxes aimed at addressing the environmental challenges humanity faces. We estimate the optimal Unconditional Income based on Pigouvian taxes as 104.1€, and we find that 62% of Portuguese households would increase their real disposable income. The richest households would face a 8.4% decrease in their real disposable income while the poorest would face a 52.3% increase. We discuss the long-term effects of this proposal and how to bridge it with a future UBI implementation.