Wednesday, January 22, 2014

UBI (3). Taxes, income and Welfare.


An often repeated argument against increases in welfare, including UBI, minimum wages or payments to alleviate poverty, is that it will fuel inflation and most will end up no better off. (More market advocates don't seem to have the same faith in "the market" to hold prices down for the poor, as they do for the rich).
We never see that argument made against the 17 to 20% increases at the top end, which are already fuelling inflation, in food and housing, making prices too high for poorer people.

The answer is, to make the rich less wealthy.

The Laffer curve theory, the idea that Government share of the economy displaces private share, is often cited as a reason for not expanding the size of Government spending.
The theory is generally given as an argument against higher taxes along with the idea that higher taxes will simply be avoided.
 The evidence shows, however, up to a certain point, Government spending on infrastructure, education, health, services, welfare and social policy helps the private sector as well.
The worlds most successful economies generally have a Government share of the economy greater than ours. We have a lot of room to move in this direction.
However, a UBI is a change in distribution of incomes, not an increase in the size of Government.
WINZ will shrink, for a start. So will tax compliance costs for small business.

Higher progressive taxes are inevitable. As Obama said "it is math". We cannot have a viable economy/society while reducing Government services below a minimum and continuing to borrow, so a few wealthy people can pay less tax.
We cannot afford the compounding interest, on the billions required over time, for National's unaffordable tax cuts.

Middle to upper middle income PAYE earners claim, with some justification, they are paying a disproportionate share of taxes.
They are in the middle, between the better off, who can use tax dodges, and the poor, who do not have enough to pay tax.
A more even distribution of taxes, maybe, with capital gains taxes, financial transaction taxes, wealth taxes, which share costs more fairly around all sources of income/wealth, will  allow us to reduce PAYE income taxes share..
Broader definitions of income, for tax, makes the system fairer.

The psychological effect of universality. "I am getting something back for my taxes, even if I am paying more tax than I am getting back" should not be underestimated.
If New Zealand super was not universal, it would have been steeply reduced, or gone, 2 decades ago.

The highest marginal tax rates are paid by those on the lowest incomes. Then there are regressive taxes such as GST.  At the bottom end high marginal rates really are a disincentive to work. Abatement rates, plus work and transport costs means a welfare recipient that does some work is often worse off. At the other end I do not know of anyone who will turn down an extra million dollars in income becuase they may have to pay 600 thousand in tax.
Certainly didn't stop me from trying to work harder to raise my income, when marginal tax rates were 60%, in the early 80's..

I have no sympathy at all with those on high incomes who complain they use the same services as those on low incomes, but are paying a greater dollar amount of tax.
They are benefiting the most from the society NZ taxpayers and workers have built, and from Government services. That is how they became  wealthier! It is only fair that they pay the most. Chances are,  if they had been born in a country without our education, infrastructure, social and health systems, they would be the one in the cardboard box on the street.

Progressive taxation  is the price of living in a well resourced, pleasant, and cohesive society.

If you don't like it, move, to a tax free paradise, like Somalia!

But first, Please be consistent with your principles, and give back to New Zealanders all the proportion of your wealth that you earned because of our  efforts and support.

UBI (2) Why should we push for a UBI? (Universal basic income).

Why a UBI?

Firstly. To overturn some paradigms:
That a great many people should lead poor and constricted lives, so a very few can be rich.
That ordinary people are disposable economic production units.

The economy, and I use the word in its broadest sense, exists for people, not the other way around.

New Zealanders, apart from a few extremists, generally accept that some of the income/resources available to those in paid work is transferred to those who are too young, old, ill or incapable to undertake paid work and those who undertake work, such as childcare, which is essential to our society.

The debate is about the amount, and how to fund and distribute it.

So. Why should we use a UBI?

A UBI empowers everyone, especially those who are currently marginalised, with the principle, everyone should have enough of societies resources as of right, for, at least, the necessities of life. I would go further, and say that everyone deserves enough, to be a inclusive part of the community.

A UBI acknowledges, and enables a living, for the many people, such as those bringing up children, (Mostly women) who carry out essential, but currently poorly paid or unpaid, services for our society.

A UBI looks after those whose work is displaced by the necessary shift to a more energy efficient and environmentally sustainable economy.
We cannot expect the involved workers, for example, coal miners, to bear the whole costs of the shift.

A redistribution of income to those at the lower end, who have to spend all their income, will be “good for business”, especially local small and medium enterprises (SME’s).

A UBI and initial flat tax rates removes the high marginal rates on low income earners. Encouraging workforce participation, entrepreneurship and progress away from “welfare dependency”..

The simpler tax system possible with a UBI makes compliance easier, especially for SME’s, and avoidance harder.

Redistributing income to those who spend it locally, instead of on Maseratis, Hawaii holidays and imported electronic junk is good for our balance of payments.

It reverses the, economically and socially disastrous, re-distribution of income upwards of the last 3 decades.

Increases the money available for savings and investment locally.

Libertarians, the principled ones, can see a lot to like in giving people choices in how they spend income, rather than giving it to the Government to spend. Less Government involvement in income redistribution and allocation may well “shrink” some parts of Government. We see from the “mincome” experiment , that spending on welfare, health care, crime and other effects, of poverty and social dysfunction, will reduce over time.

A UBI allows time out; to study, get well, bring up children, carry out voluntary community work, teach, start a business, avoid burnout, add to community services/wealth.

We already have a UBI, for older people. NZ super.
It has been totally successful in removing poverty amongst the elderly, (less than 3% in poverty).

We can, at least, extend it to children.

Time we “made poverty, history!”

Also published in  The Standard

UBI (1). Memes and Paradigms.

This post is a follow up from.

The way human beings process information means that  memes and slogans  are powerful ways of influencing people.
We are all aware of the persistence of memes like “we cannot afford super”, “bludging beneficiaries”,  “poverty is unsolvable”, people will only work if forced” etc……….

Propagandists know that if you repeat a meme or slogan often enough it becomes truth, even in the minds of those who should know better. The extreme right wing know this. Which is why they often just endlessly parrot the same mindless slogans.

More thoughtful people try and counter memes with facts and figures. Trying to persuade with reality.
In fact we  need to counter memes with our own.
“We cannot afford super/welfare”.
With;  We did in the 30’s to the 70’s when New Zealand was supposedly much poorer. Or, “We do very well out of the unpaid contributions of the elderly,  (and mothers,  carers, and all the other unpaid community workers). ”.
“Bludging beneficiaries”.
With;  “Those on welfare are you and me,  given a bit of bad luck or ill health”.
“People  are inherently lazy and need to be forced to work”. (I consider this a piece of projection from the greedy section of the right, who cannot conceive of anyone doing anything without reward).
With;  Most people contribute to society if they can.
“Poverty is unsolvable”.
With;  We solved it for the elderly in New Zealand.  (less than 3% in poverty).

A paradigm shift happens when someone challenges the accepted way of doing things.
When, for example, they ask.  “Why should electric vehicles be the same as fossil fuelled ones?”.

Those growing up after the 80’s will find it hard to imagine the paradigm shift, that was the rise of Neo-liberalism, in the 80’s, in New Zealand. The colossal untested experiment, it really was,  and the huge shift of wealth from the lower and middle classes to the richest of us.

Fairness, inclusiveness, equality, and the right of everyone to a decent life, was basically accepted by the left and right wing in New Zealand.  It wasn’t perfect, of course, but the existence of the ladder to a decent life, for everyone, was a large part of our national goals. Something we were, rightly, proud of.
The great neo-liberal experiment has succeeded in changing our social paradigm to a much more “dog eat dog”,  unequal and mean spirited society. The promised economic gains have only eventuated for a very few.

I don’t want to paint us into a corner and say that a UBI is the only answer.  (Thanks McFlock)  It is not,  it may not even be the right one.  (More on pros and cons next post).  Big changes  without deep thought,  examination, research, discussion and consensus,  is something we should leave to the other side.

But. In exploring ideas like this (Thanks Weka) we are, hopefully, starting a paradigm shift away from Neo-liberal acceptance of meanness and inequity  towards inclusiveness, equity, fairness and the right of all of us to a decent and hopeful life.
Why should we accept poverty in a country which has more than enough resources for everyone?
New Zealand once led the world in social policy. New Zealanders, of all political colours, are proud of our world leading human rights and social welfare initiatives.

Dauphin was the “town without poverty”

New Zealand could be,

The country without poverty” .

Also Published in The Standard


Thanks to NZ Femme who put up this link.
“‘It Can Be Done! Conquering Poverty in the US by 1976’, James Tobin, who would go on to win a Nobel Prize, wrote in 1967. At that time, almost 80% of the American population was in favor of adopting a small basic income. Here is an interesting article about this episode of American history. Nevertheless, Ronald Reagan sneered years later: ‘In the sixties we waged a war on poverty, and poverty won.’
Milestones of civilization are often first considered impossible utopias. Albert Hirschman, one of the great sociologists of the previous century, wrote that utopian dreams are usually rebutted on three grounds: futility (it is impossible), danger (the risks are too big) and perversity (its realization will result in the opposite: a dystopia). Yet Hirschmann also described how, once implemented, ideas previously considered utopian are quickly accepted as normal.”

Encapsulates the empowerment of people inherent in both income security and real democracy.
“Almost 80% of the American population was in favor of adopting a small basic income”.

New Zealand was once considered one of the best places on earth to live.

It could be again …

Also published in The Standard. UBI.