Basic Incomes Deserve Proper Thought

On April 15 Newsroom carried an article by Susan St John headed:
"Universal basic income: be careful what you wish for"
and saying "Any universal basic income NZ implements would likely be far too low, helping all the wrong people and leaving those in desperate need even worse off. Adapting what we already have in place is a much safer approach"
Also "Less understood, is that a UBI is much, much more expensive than the welfare payments it replaces. High tax rates on earned income are needed to fund it."
And "The idea is to replace the mishmash of hard-to-access, highly means-tested or targeted benefits with a simple unconditional individual weekly payment for all. Sounds so simple and appealing".

Well, whatever the level something is better, much better, than nothing. I cannot see how any payment, no matter how low, can help all the wrong people and leave those in desperate need worse off.

I have always admired the work of Susan and the CPAG group she heads but I have worked on the 3 problems of Basic Income for a long time and think that her comments do not apply to what I wish for. The work that I and others have done has led to some insights which need much detailed work and refinement but which show that Basic Incomes are practical. They are simple and should be appealing.

The 3 problems of BIs are the level of the payments, the tax or taxes needed to pay for them and "how to get there from here".

First let us drop the "Universal" word. It leads too many people to think that all adults ought to have the same payment as Superannuitants. They then conclude, rightly, that this is unaffordable and so avoid thinking any further. Or else that Superannuitants incomes should be cut. Superannuitants are mostly beyond working age - particularly if their working life has been physically hard or demanding in other ways. So we should consider 3 different BIs, say, 0 to 18, 18 to 65, and 65 upwards. Some Child/teen benefits and superannuation are both currently funded and need some "tarting up" but the major new cost and change is needed for the adult 18 to 65 group.

Next, some people think that the adult rate ought to be a living wage. If this were so there would really be a problem for many people who might want to save the cost and hassle of going to work. The same would apply if the Adult BI were to be set at the minimum wage for a 40 hour week.
We need a tax-free Basic Income for adults which they will always get with no need for costly bureaucracies or any wealth, income or other restrictions. If your income suddenly disappears the first desperate need is for almost anything that will let you and your dependents continue to eat and try to find something more. The cost of looking for work, going to interviews, buying the paper etc is significant if you have no income.

The first guide to a sensible figure comes from considering the great "con-trick" in our Personal Income Tax system. This is a great example of the fact that all exemptions from taxes favour those who can use the exemptions. If you earn more you get more exemptions (gifts) from Government. Thus the rate is set at 33% on incomes above $70,000/yr but this is not charged on all the income. There is a lower rate of 10.5 % up to $14,000/yr. The exemption at that point saves the earner $3150/yr in taxes. There are more exemptions if you earn more. But it is only those who earn $70,000/yr and more who get all the exemptions. These exemptions total $9080/yr. And you still get $9080 /yr of exemptions if you earn $5,000,000/yr. If you have no income (such as a woman caring for children who is denied benefits because she has a working partner) the exemptions are worth nothing to them. How can this possibly be so in a country which likes to think that it is fair?

If Government gave everyone $9080/yr and charged 33% on ALL income then those on $70,000/yr and above would have exactly the same income after tax as at present. Those with no income would be $9080/yr better off. And everyone below $70,000/yr would be better off. Is this not "simple and appealing."

But as Susan says in her article "The idea is to replace the mishmash of hard-to-access, highly means-tested or targeted benefits with a simple unconditional individual weekly payment for all. " So we have to go a little further.

To get the required comparable data I am still using 2015/16 figures for my arithmetic. At that time the Basic Income for adults would need to be about $11,000/yr in order to replace most benefits for the adult group and retaining hardship allowances. The cost of this would be 31 billion/yr. But the extra income from charging 33% on all income would be 18bn/yr and the savings from replaced benefits with their accompanying bureaucracy would be about 6bn leaving 7bn to come from new or changed taxes. My choice, in the absence of better alternatives, would be a Resource Tax of 0.5% on the improved value of properties collected with local body rates just as regional levies. Simple to collect and hard to avoid. Also political suicide if not accompanied by a Basic Income such that some 70% of people are better off.

I will shortly publish a small book "Why are the Poor poor? But in the meantime my website - perce.harpham.nz - has several of my papers including discussion of the transition issues and the choice of tax. Also a great paper by Gail E Duncan showing that our present benefit system is in breach of our Human Rights legislation and our various international agreements. Scoop has published later papers by each of us.

Full marks to Grant Robertson for having the courage to say that he is thinking about Basic Incomes. I hope that many people will do so. Basic Incomes have the potential to transform our society. To include those who are at present the undeserving poor, those who get benefits with accompanying stigma and indignities as well as restrictions and surveillance akin to prisoners released on parole.

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