ZWT Proposal: Uniform Income Tax To Fund UBI

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.