Features; Opinion

Neither universal nor individual nor unconditional

Written By: Pierre Madden

It is Voltaire who quipped that the Holy Roman Empire was neither holy nor Roman nor an empire. I am convinced that Basic Income will be implemented in the next decade. By its definition, BI is universal, individual and unconditional. However, none of these features will be a part of BI as it first materializes.

A universal demogrant is just too expensive to contemplate, except in Alaska where oil revenue is distributed to every man, woman and child. Giving the same amount to everybody only to claw it back in taxes from most, while philosophically pure, flies in the face of common sense. That is why all serious proposals are structured as a negative income tax (NIT). In fact, there are already features in the Canadian federal and provincial fiscal systems that function as NIT with regular cash transfers.

The basic unit in our society is the family. Statistics are kept by households. An individual is no more than a couple divided by the square root of two. This is in part just the common-sense recognition of the economies of scale of collective living. It is not four times as expensive to live as a family of four than to live alone, only two times (i.e.: cost of living alone times the square root of four). In Québec, two individuals sharing an apartment would each receive $623 per month for a total of $1,246. At some point, the government will consider them to be living in a “common law marriage” and cut the benefits to $965 in total (the government does not follow the square root rule). The fact that you do not sleep together or that you are siblings is not a defence. Across the board individuality would raise the problem of “the banker’s wife.” The banker is very rich but his wife who benefits from his wealth has no income of her own and would therefore qualify for any income subsidies. Of course, it has been argued forcefully that these women are often trapped in their gilded cage, unable to escape an abusive marriage, for instance.

Finally, governments are reluctant to abandon conditionality of benefits, a paternalistic remnant of the distinction between deserving and undeserving poor. A liberal democracy’s commitment to providing everyone with a quality education, for example, is not paternalism but the recognition of a basic right. This right is expanding to include people in their late twenties and early thirties as jobs for this generation disappear and those that are left require more qualifications. All non-health-related government benefits today are based on the condition of job seeking. The benefits themselves must in no way compromise the incentive to work. Part of the justification for this is economic, the fear that wages will skyrocket, profits will plummet and the economy will collapse if no one is willing to work anymore. Another part is ideological; education and work are seen as developing and preserving “human capital.” Government wisdom rather than individual freedom decides how that is defined.

While I am optimistic that Basic Income will see the light of day in my lifetime, I am prepared to accept an imperfect version and leave to future generations the task of improving it.

 

Author biography: Pierre Madden is a zealous dilettante based in Montreal. He has been a linguist, a chemist, a purchasing coordinator, a production planner and a lawyer. His interest in Basic Income, he says, is personal. He sure could use it now!

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4 comments

  • Steve Godenich

    “The basic unit in our society is the family.”

    Liberalism from the point of view of Thomas Paine and Edmund Burke teaches us that the ‘individual’ is the basic ‘political’ unit of our society[1]. Children are the responsibility of their parent(s) until they reach their majority. A tapering income (or NIT) is most easily understood and calculated strictly on an individual basis, especially the tapering portion. Issues of welfare and education for children of single parents, as well as health care costs that vary by age, infirmity and illness require more thoughtful consideration.

    Health care is usually calculated on an actuarial-based insurance model. Since everyone risks aging, infirmity and illness, it makes sense to socialize the costs across a large collection of individuals so that premiums can be kept reasonable for all, especially the most at-risk individuals.

    As for issues of welfare and education for children of single parents, residential education[2] is one viable solution. The presence of parents to advocate for high standards in these institutions for their children would also benefit orphans that use these same institutions. Simply giving cash to mothers may be an incentive for child production in an already populous world and necessitate extraordinary costs of a large bureaucracy for effectively policing adopted children across a large geographic area with possibly dubious results.

    A poverty-level individual tapering income is a better term than ‘negative income tax’ since the former implies alleviation of poverty for every individual adult and the latter implies an indeterminate sized family and the necessity for an income tax to exist. The income tax was reintroduced in 1842 to reduce tariffs and encourage free trade[3]. It had originally been created for other purposes[4]. Traditionally, direct taxes like the income tax were used as the primary source of government revenue and indirect taxes like the sales tax were a subsidiary form of government revenue[5]. Both income tax and sales tax helped to keep property taxes at a more reasonable level. With advances in technology, it may be advisable to replace direct income taxes and indirect sales taxes with an indirect flat tax distributed to local governments, similar to [6], on all economic transactions[7], proposed to government in 2005[8].

    In economic terms, a tapering income may act as a counter-cyclical liquidity complement to Main Street during the business cycle and apt tax reform may act as a stimulus for the economy to increase net wages for productive employees and increase net revenues for productive businesses. Great talent would be freed up from the unproductive work of artfully dodging taxes for the challenge of implementing the tech, fintech and financial services of the new tax system. It would reduce speculative high-frequency trading and the risks they impose on the financial system, encourage creative destruction of uncompetitive TBTF SIFIs and allow new, innovative businesses to take their place without driving a large number of displaced employees and their families into poverty. The economic gains for every individual and the economy, at large, may socially and economically outweigh or be a reasonable tradeoff for the moral hazard of expending public funds on those citizens without a job.

    [1] What is Classical Liberalism? – Learn Liberty | Youtube
    [2] Residential Education: An Emerging Resource for Improving Educational Outcomes for Youth in Foster Care? | Lee, Barth | 2009
    [3] Robert Peel – Audiopedia | Youtube
    [4] The Non-Democratic Origions of Income Taxation | Mares, Queralt | 2015
    [5] Carl Menger’s Lectures to Crown Prince Rudolf of Austria – Public Finance Chapter | 1876
    [6] APT Tax | Youtube
    [7] Intraday Liquidty Flows | Federal Reserve Bank of New York | 2012
    [8] Alternative Proposals Reform | Video | C-SPAN (Edgar Feige)

    • Pierre Madden

      You are probably right about Paine and Burke but they don’t get much traction these days. Government programs and the tax system are based on families and households. Even statistics are gathered that way. Of course, it’s ideological: a handy way to discount women and children.
      But overall, do you agree with my take on how BI will initially be implemented?

  • Steve Godenich

    Hi,

    There is synergy and I wouldn’t bet against your assertion. I appreciate the ‘banker’s wife’ scenario for an individual-based tapering income, but I also appreciate the ‘welfare queen’ scenario for a household-based tapering income. I would hazard to say that a solid business case is needed for demonstrating the economic advantage of a tapering income to stakeholders, e.g., government, unions, businesses, taxpayers, retirees, etc. Going forward with more advanced technology than door-door census taking and statistics gathering, I’m hopeful that household metrics may be supplemented with more individual metrics.

    Personally, I’m approaching the problem from both the business cycle angle and the tax reform angle because they dovetail on the desirability of eliminating the marginal tax rate. There may be stiff resistance from some portion of stakeholders in the status quo, like politicians, civil servants, special interest groups representing recipients of government incentives, tax lawyers, accountants, ideologues, etc. It is not in their immediate self-interest to support the proposition unless their concerns are fully identified and addressed.

    I am looking forward to a good book[1] after finishing Burke[2], Paine[3] and others[4] — warm regards…

    [1] The Great Debate | downpour com | 2013
    [2] Thomas Paine – Rights Of Man – Full Audiobook | Youtube
    [3] Reflections on the Revolution in France by Edmund Burke | Youtube
    [4] Giants of Political Thought | downpour com | 2008

  • Zap

    “The benefits themselves must in no way compromise the incentive to work. Part of the justification for this is economic, the fear that wages will skyrocket, profits will plummet and the economy will collapse if no one is willing to work anymore.”

    FACEPALM !

    No, stupid.
    UBI MUST compromise the incentive to work.
    FUCK “work”. That’s what machines are for. That is what AUTOMATION is for you dumb retrograde !

    God! “opinion”…
    profits will plummet ANYWAY if no one will BUY ANYTHING since they can’t AFFORD IT, stupid !

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