with No Comments

Post No.: 0993ubi

 

Furrywisepuppy says:

 

In the UK at least, we’ve been long fixated on taxing the proceeds of labour (the working people) far more than wealth (the already-rich who own assets or capital) and inheritance. Income tax rates, with National Insurance on top, are higher than capital gains tax rates, and inheritance tax thresholds are high – hence the hardworking poor can pay a higher total effective tax rate than the rich who could, in many cases, just sit on their behinds and wait for their assets, savings and investments to appreciate in value, or just inherit these. And that’s without talking about aggressive tax avoidance schemes.

 

So labour is punished over wealth and inherited capital, thus the rich get richer whilst the poor stay or get poorer. You can annually expect every ~£4/10 of new wealth to go to the wealthiest 10% of the population, whilst ~£1/10 is shared by the poorest 50%. Why aren’t more people twigging onto the fact that billionaires have gotten richer whilst more ordinary families are struggling to afford even food or heating?! Britain is supposed to be an advanced democracy and developed economy(!) Food bank charities shouldn’t be necessary here, especially for those with full-time jobs.

 

Maybe we should therefore progressively tax wealth and inheritance more fiercely than income? This’d more closely reflect a ‘meritocracy’ and earning one’s wealth, and reflect an individual’s true productive contribution to the economy instead of favouring gains generated from economic rents or unearned income.

 

Howbeit, some inheritances are already essentially double-taxed (once when acquiring the money then again when bequeathed). And what about parents who’ve been prudent with their own personal consumption in order to intentionally provide a sizeable inheritance for their children? It’d seem harsh to penalise them when others make different life choices.

 

Yet from the inheritor’s perspective, these are unfair, unearned gains – and it’s about taxing unearned gains from inheritances and capital gains more highly. Most of the time, gifts aren’t even taxed at all.

 

These taxes would then legitimise the state as a contributor to well-being rather than a drag on it since real production will be more incentivised instead of the hoarding of asset wealth or making money from the financial markets.

 

Assets like real estate do generally only appreciate in value over time because land is a finite resource, and the scarcer something becomes, the more valuable it becomes. Assets like land can secure economic rents for the owner without them being the one making productive use of it too. Most of the world’s wealth is tied to ‘non-productive assets’ like real estate. These don’t generate income or increase in value through its own productivity – its value instead comes from simply selling it at a higher price than it was purchased. The stock markets aren’t part of the ‘real economy’, which is the part that actually produces real goods and services as opposed to merely gambles on them via the casino that is the financial markets.

 

We should redistribute resources that are deemed to pertain to everyone. The concept of a ‘citizens’ fund’ is based on the principle that we’re all entitled to the wealth that’s been built using the common (i.e. public, everyone’s) resources of a country (e.g. its land, minerals, social infrastructure). Private firms can utilise these common goods (that belong to all of us) for their own private interests but must pay a high tax rate towards the state (i.e. towards all of us) as a form of compensation. The land, minerals, fish, trees and other commons are everyone’s hence everyone should profit from their exploitation (like how Norway treats its oil and Alaska treats its minerals), not just a few private firms.

 

All these tax revenues could be redistributed universally to all citizens. This could mayhap come in the form of a universal basic income (UBI) – a guaranteed regular income that everybody gets to cover their basic needs regardless of their needs, contribution or means (the equality principle)?

 

It seems fatuous to include even rich people here (a UBI isn’t based on the need principle) yet this could solve the perverse effects of means-tested benefits, like people keeping below a certain level of savings otherwise they’ll lose/reduce their state benefits – we don’t want to discourage saving if one is on the borderline of eligibility for means-tested benefits, especially since we need citizens to save for their pensions; for if they don’t then they’ll need to rely on the state again when they retire. We also don’t want people to lose out by starting work or upping their work hours – we don’t want to discourage people from working (more), especially in this economic climate of poor pay and zero-hours contracts at the low-wage end of the market where welfare benefits can seem more secure and reliable. This’d also hugely simplify the administration of welfare hence decrease the costs of managing the tax credit system by replacing all payments with one single UBI without complex conditions.

 

It lacks the contributory principle but counterarguments are that most people do contribute towards the economy in non-monetary ways, such as via being carers, and for having contributed in the past, or they will in the future.

 

Wealth inequality results in inequalities in health, education and more; including in the justice system. By eradicating poverty and reducing inequality, we can improve health. And by preventing ill health, we’ll save financial and social costs when it comes to needing to treat the ill. Health for the poor will improve via affording better food and housing, via giving people the opportunity to leave abusive relationships or damaging environments and thus reducing stress-related illnesses, and via giving people a more secure long-term future that they’ll be more motivated to plan for and make the most of.

 

People who don’t see a secure long-term future for themselves are more likely to engage in short-term hedonistic activities that risk their health, like drug abuse, and are less likely to engage in healthful activities, like exercise i.e. we tend to live for now if we don’t see a good future for ourselves or if we don’t think we’ll live long enough to face the long-term consequences of our actions. And vice-versa.

 

But a UBI could focus too much on providing income for consumption rather than providing direct public services that help with, say, social care, education and housing. This is analogous to giving a homeless person some money instead of some food, a hot drink or shelter, and them potentially spending that money on alcohol or other drugs. Albeit if everyone had a basic income then perhaps far fewer people will feel the need for self-medicating with recreational drugs since poverty is stressful? Still, there are other ways people can waste money or consume things for immediate pleasure over long-term utility. Should this UBI therefore come in the form of vouchers?

 

At what age should people start receiving this UBI? This is tricky – babies need resources to raise but we don’t want to incentive irresponsible parents having children just to get a UBI for them too. Obviously we can’t just give this money to the child – it must go to the parents/caregivers to spend on the child’s behalf, but they mightn’t spend or invest it completely on or for the child.

 

What about immigrants? At what point should they and their children be accepted into the scheme? After 10 years of work? Should those with special needs be given more? Will it disincentivise work? Well this basic income is indeed just for basic survival and shouldn’t afford anyone any luxuries – hence if anyone wants to go on holiday, etc., they’ve got to find a job. But that’ll be their non-coerced choice i.e. one not coerced by poverty.

 

Wealthier mates appearing more attractive still matters to some too hence many people will still desire to work to become richer than others. And wealth status is always relative thus people don’t need to be far richer than others to appear more attractive than them – just a tad more. (That’s why the quest for greater equality isn’t about abolishing relative wealth. There’ll always be a ‘wealthiest 1%’ and ‘wealthiest 10%’ – but they don’t need to be so incredibly far more wealthier than the poorest.) It’s not even about one’s absolute amount of wealth otherwise every single ancestral human would’ve been considered too poor to be attractive to mate with(!) They obviously did find mates even though none of them had a Louis Vuitton bag or Lamborghini (or any car)!

 

So there’ll still be competition and a drive to make more money than others. People could still work for a higher standard of living. Alternatively they could engage in important but unpaid work (e.g. caring for family members, raising one’s children) without stress, pursue personal ambitions, seek mastery in the arts, culture or sports, be more active and healthy, do educational research that could result in creations or discoveries that ultimately benefit society, undertake innovative scientific R&D with less reliance on external funding, start enterprises that mightn’t bring immediate returns but may benefit society in the long run, and so on.

 

Various ‘Institutes for Advanced Study’ across the globe, funded entirely by endowments, grants or gifts, have a mission to further the pursuit of knowledge for its own sake. Charles Darwin came from a well-to-do family, which meant he didn’t need to worry about his next meal and could even travel to faraway islands like the Galápagos to satisfy his curiosities. This allowed him to dedicate his life to discovering something that advanced human knowledge for endless generations down the line.

 

Okay hardly every privileged person has talent or a purpose higher than themselves! Many wealthy heirs are unproductive and don’t work or contribute towards society because ‘what’s their motivation?’ Nevertheless, with a UBI that covers the basic necessities to live – no one would need to steal for their survival, beg on the streets, be homeless, prostitute themselves, be demeaned in a social security office or be driven into badly-paid or degrading employment i.e. employers will be less able to exploit impoverished people’s desperations. Artificial intelligence is replacing many jobs at various skills levels anyway.

 

People can still better themselves, their family and society without the coercion of poverty or homelessness.

 

Notwithstanding, would sellers increase their prices to exploit the UBI, just like some landlords exploit knowing that a tenant claims housing benefits so they increase their rents knowing that the government will ultimately pay for it? Will laws to prevent this be workable? There remain the concerns about how all this will be funded, whether the rich should receive it too, what if some waste their income, and other questions regarding how a UBI will work and most optimally i.e. the details probably matter for its success and sustainability or failure. Several places worldwide have been trialling basic incomes as small-scale pilots because of these unknowns.

 

And the results so far overall indicate that they don’t increase idleness. They boost mental health, school attendance and trust in social institutions and the community, whilst reducing crime.

 

But the biggest challenge relates to how to fund a UBI sustainably (and changes in political parties curtailing these trials or failing to act upon the promising findings).

 

Well we could perhaps fund them by taxing wealth and inheritance more highly because, really, there’s more than enough wealth in this world for everybody to live in dignity if only it were better redistributed instead of concentrating ever further into the hands of a relative few. Even multibillionaire Warren Buffett calls for the rich to be taxed more.

 

Most UK citizens understand the benefits of the NHS – universal healthcare that’s free at the point of use. (Post No.: 0975 compared publicly versus privately funded healthcare systems.) They cannot imagine the country without it. But it was an extremely radical idea at the time.

 

A similarly radical idea of today would be a universal basic income.

 

Woof!

 

Comment on this post by replying to this tweet:

 

Share this post