Many proponents of Universal
Basic Income (UBI) suggest that this program can get enough finance by partially replacing or completely cancelling the existing Govt. Welfare Programs. However the complete cancellation of
the welfare programs which will mostly affect the poor, and underprivileged will
face strong resistance, protest from many quarters of society including the interest
lobby groups like pensioners, women, etc., making it a hyper sensitive issue in
the mainstream media. Hence, the complete cancellation of the popular Govt. welfare programs
in order to fund the UBI program will become almost impossible. Therefore, let us give up the idea of withdrawing the
welfare programs for financing UBI for the time being and explore some new
avenues to finance it.
Zero Work Theory
which also considers UBI as the part and partial of its overall program has a very important proposal to fund the UBI. It argues;
"there should be an Universal or Uniform Income Tax (UIT) to fund the
UBI". The Government should implement a flat rate (Uniform) Income Tax on
every income earning that the people make or receive.
The UIT needs to
be perhaps up to 30% to get enough funds to make the UBI an adequate amount. The
total amount of UIT collected should be “equally” divided among all its people.
In this UIT system, the poor who earn less
than the UBI amount will gain much
more than what they pay in the form of UIT, even though, the tax percentage
that people pay should be equal for all, irrespective of rich or poor in line
with the main principle of UBI.
Let me
demonstrate it by giving an example in a very simplistic form. Suppose an
average person in a country needs $4600 a month to maintain an adequate
standard of living. To make it work, everyone who receives UBI needs to pay a “flat rate” income tax of
30% on every income earnings they make.
Suppose in a
given country the average poor earns a total of $2000 a month, middle class
$20,000 a month and the average rich earns 50,000 a month from all quarters of
their income earning.
Now start to
calculate. The total income of the average poor person (including UBI) before
the Tax reduction will rise up to (2000+4600=) $6600, after deducting 30% UIT
amount of $1980 from the total sum he/she will be receiving (6,600-1980=)
$4620, which is $20 more than the UBI amount
but overall a net gain of $2620 for these low paid workers.
In the case of
middle income person, the total amount (including UBI) of income he earns
before the Tax reduction, comes to (20,000+4600=) $24,600. After deducting 30%
UIT amount of $6380 from the total sum he/she will be receiving (24,600-6,380=)
$18,220, which means a $1780 loss from his net income.
In the case of
rich or upper income person, the total amount (including UBI) of income he earns
before the Tax reduction, comes to 50,000+4600=$54,600. After deducting 30% UIT
amount of $18,380 from the total sum he/she will be receiving (54,600-18380=)
$43,620 which means a $6380 loss from his net income.
However, the
person who do not work for whatever reasons and receive absolutely no income
from other source except the UBI also has to pay 30% UTI out of it, which means he receives
(4,600-1380) = $3,320 as the net UBI amount.
This will encourage the unemployed to seek work. It will also contribute
considerably by recycling 30% of the UTI back to the national UBI fund.
UBI should be
Universal in its entirety, in the sense everyone is entitled to receive it as
their fundamental human right. Limiting it only to the adults will grossly
victimize the children of the poor. A well to do parent can fully afford to
look after the need of their children, which is not in the case of the poor who
need it the most. Therefore, UBI should start right from the moment the child
is born and shall continue until the person’s death.
All this will allow the Govt. to
gradually withdraw and cancel the welfare programs which it finds not
necessary, since it will have less or no resistance from the sections of
society which I mentioned in the beginning.
Of course, this UIT will face
fierce resistance from some higher income earning groups especially from the
rich lobby which I believe not as difficult for the Govt. to overcome. Indeed, this
UIT economic measure is necessary in today’s rapid progress in the technological
sector specially in the field Artificial Intelligence (robots) automation leading
into widening the income gap between the rich and the poor thus extreme income disparity.
The UBI aided by the UIT will help to reduce this extreme economic polarity and
gradually lead the world towards a more equal egalitarian and humanitarian
society.
I would very much
like the readers comment on this blog.
Copyright 2017 Valerian Texeira.
