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Christian Engström, “A concrete and financed proposal for basic income in Sweden”

Former MEP Christian Engström has written a “concrete proposal” for a basic income guarantee in Sweden. Originally published online only in Swedish, Engström’s paper is now available in English.

Christian Engström, a former Member of the European Parliament 2009-2014 for the Swedish Pirate Party, has prepared a detailed proposal for an unconditional guaranteed income of 900 EUR (8333 SEK) per month, tax-free, for every Swedish resident between the ages of 19 and 65.

The basic income would replace Sweden’s current social assistance programs, student aid, and unemployment benefits, but no other government-funded programs. Disability and sickness benefits, child benefits, and the state pension would remain in place.

Engström’s basic income guarantee is designed as a negative income tax rather than as a universal grant, with the amount of the grant tapering off as the recipient earns income. Specifically, Engström proposes a 33% income tax with a reduction of the basic income grant by the same amount. (For example, someone who makes 300 EUR would pay 100 EUR in income taxes, and see their basic income lowered by 100 EUR, but would still net 100 EUR.)

Engström proposes no increase in income taxes, and points out that 33% is Sweden’s current normal marginal tax rate for low- and middle-income earners.

The basic income grant would be financed in part through money saved on the social assistance programs to be replaced. The rest of the funds, according to Engström’s proposal, would come from eliminating certain industry-specific discounts on value-added tax (VAT), such as those enjoyed in the food and restaurant industry.

In presenting his specific plan, Engström is motivated by concerns about political feasibility. He states that, ultimately, he would prefer a higher level for the guaranteed minimum income–and that his “concrete” proposal might be seen as an initial step toward bigger and more refined variants of the basic income:

“I hope that in time we will see a basic income of maybe 1,100€ or more in Sweden. But it is not strictly necessary to start at such a high level. It is enough that the basic income is livable, and not lower than today’s social assistance benefits. Then we can introduce the new system, which is the big and complicated step. Once we have done that, and can see in practice how it works and what it costs, we can continue improving the basic income through the ordinary political process.”

To date, basic income has received little mainstream political support in Sweden — unlike neighboring Finland, where an experiment on the effects of an unconditional basic income will begin next year.

Read the details of Engström’s proposal in the full report, available here:

Christian Engström “Basic Income: A concrete and financed proposal for basic income in Sweden“.

 

Video of Engström presenting his proposal at Finland’s International Basic Income Seminar in Turku, August 2016.


Reviewed by Genevieve Shanahan

Stockholm photo CC BY-NC-ND 2.0 Stina Stockholm

About Kate McFarland

Kate McFarland has written 512 articles.

Former lead writer and editor of Basic Income News.

The views expressed in this Op-Ed piece are solely those of the author and do not necessarily represent the view of Basic Income News or BIEN. BIEN and Basic Income News do not endorse any particular policy, but Basic Income News welcomes discussion from all points of view in its Op-Ed section.

3 comments

  • Steve Godenich

    This palliative for the patient suffers from a similar misdiagnosis of the cancer as the Canadian policy prescription:

    a) The stipend does not have a 100% peg to a poverty threshold (food, clothing, shelter) to eliminate poverty.

    b) The stipend is not based on the individual Swedish citizen. Concerns of immigration status are an entirely separate issue, e.g. offer a migration path to citizenship.

    c) The income drawback rate is greater than 50% (66%) because of the marginal tax rate. An alternative is replacing income tax & VAT with a tiny indirect flat tax on all economic transactions, e.g. [1] and distributing the proceeds to local governments who are held accountable by their local constituencies.

    d) Any rise of taxes on the consumption of food may further increase the poverty threshold and this example reinforces the point of pegging poverty elimination to the poverty threshold. Dynamically determining the proper poverty threshold is also an issue that is not fully addressed.

    e) Females are financially subsidized to increase child production in an already crowded world with finite resources. An alternative is creating/enhancing residential education for orphans which are voluntarily made available to children of single parents, male and female, so they may continue to work and remarry if they wish without jeopardizing child development.

    f) It is not clear the medical goods & services provided are sufficient, especially for disabled persons, or whether they should be provided as a cash transfer, voucher or directly by government and how these amounts will be calculated for each individual of varying age and health by some actuarial insurance model.

    g) It is not clear that those above 65 are topped up.

    h) Tapering income is a more appropriate term than negative income tax since the latter presumes an income tax must exist. To refresh one’s memory, the term income tax was popularized by William Pitt to temporarily raise funds for the Napoleonic Wars around 1798. Robert Peel campaigned after the war to remove this temporary tax, but failed to do so after he was elected. Abraham Lincoln created a temporary income tax to fund the US Civil War (War Between the States) and the tax was repealed after the war. For whatever contrived reasons, the US Congress created the US income tax around 1913, shortly before the outbreak of WWI. Not only does NIT imply household, it is presumptuous of the need for an income tax in a peacetime economy.

    i) Raising indirect taxes disproportionately affects the poor since it takes away a larger portion of their income. Any notion of increasing the curve on progressive income taxes to fund any poverty elimination proposition reduces social mobility and inhibits talent from quickly rising to the top, while it further perpetuates and concentrates a life of leisure for those who have received unearned inherited wealth that subsidizes their sustenance from associated capital gains from investment. This trend, over time, may cripple the economy of a nation since it suppresses talent and adversely elevates the idle wealthy as a role model seen through the eyes of youth. How income taxes and consumption taxes erode an economy, the wealth of a nation and the prosperity of it’s people is sorely overlooked in every proposition. Paying this thinly veiled head tax during peacetime is not a badge of honor, but rather an unnecessary burden on the citizenry that diminishes the prosperity of a nation.

    Correcting these shortcomings may help to provide a socially and economically desirable counter-cyclical liquidity complement to the real economy (Main Street) during the business cycle and have a positive effect on dismantling the concept of TBTF SIFI and avoid the firing off of more ghastly rounds of QE/ZIRP on an undesigning civilian population. This would enable creative destruction to carry on and allows businesses to fail and prosperous new innovative businesses to be created. In addition, replacing income tax and VAT with some form of a tiny indirect flat tax on all economic transactions (including all forms of banking transactions, e.g. [1]) may preserve government tax revenues, increase net productive employee wages, net productive employer revenues and capital gains, as well as reduce the significant long-term costs associated with the collection of these taxes. Note that optional segregated savings & investment accounts, mandated in bank charters, may further insulate family wealth, the stability of the financial system and the real economy from future systemic financial crises.

    [1] APT Tax | Youtube

    • Steve Godenich

      Correction: After the Napoleonic wars ended and the income tax was then repealed, Robert Peel reintroduced the income tax.

  • Nuno C

    I can’t understand why discussions about financing a basic income always revolves around taxing wages, money flows and cutting other benefits to population. There is a better way!

    You can finance a much higher basic income by just taxing money on itself. I mean using Gesellian taxes on overnight deposits and monies everywhere.

    As a small exemple, i can see (http://www.tradingeconomics.com/sweden/money-supply-m2) that aggregate money supply m2 is about 2 917 782 million swedish krones. Just tax 5% on that money wherever it might be and you can fund a basic income of about 15 197 krones for each people (children included). Almost twice the value of 8333 krones in your proposals and without the need for cutting on elsewhere.

    Besides you can also consider sovereign money issuance to be a part of your plan.

    Just my 2 cents…

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