Ive Marx. Picture Credit to: University of Antwerp
A news article posted in Flanders Today refers to a report, headed by economist Ive Marx, which concludes that introducing basic income in the Netherlands can actually increase poverty while having only a small effect on inequality.
Marx, from the University of Antwerp, concluded that introducing a 700 €/month basic income to all citizens with ages between 18 and 64, and 165 €/month to all minors would have a yearly net cost of 94 million Euros. That, according to the research, would have to be funded by extra taxes, plus cutting on unemployment and child allowances. As a result, around 75% of adult citizens would lose out financially, compared to their actual situation given the present-day benefits structure in the Netherlands. According to the study’s parameters, around 30% of the adult population would lose more than 10% of their income, which would contribute to an increase of poverty in 3%. Marx has also added that “proponents of the system must show why it is superior. You would have to be almost crazy to introduce it.”
In spite of these discouraging results, the study itself is not explicitly referred to in the article above, and no link to it is supplied. This way, base assumptions cannot be verified and a relevant discussion about it initiated. Furthermore, the author has not replied to contact attempts, which would allow to report on the study’s details, and compare it to other research reports and experiments.
More information at:
Editorial Team at Flanders Today, “Basic income doesn’t work, Antwerp research suggests”, July 13th 2018
This criticism of UBI has a point: tax-funded UBI is problematic. 100 years ago in the UK, the Social Credit movement said that a national dividend should be paid to all citizens. As I understand it, this was to be funded by the government taking back from banks the responsibility for issuing money. Instead of banks creating almost all money as debt, the government would issue money as social credit, which would fund the national dividend and other social spending. €700 a month isn’t enough – and, apparently, most people would be worse off. When will the UBI movement look at funding solutions other than tax?
Dear Chris,
Although most basic income proposals are tax funded – basically taking from the “haves” and giving to the “have nots” – there are initiatives, such as Positive Money, which rely on issuing money and distributing it unconditionally to the people (as in the famous “helicopter money”).
Cheers
The only way a Living Allowance will work is;
It cannot be banked and must be recirculated (spent) within a certain time or be cancelled.
It will be in the form of a Mastercard in which all transactions, debits and credits are recorded.
Childhood Allowance in trust for Childcare and Education and Recreations until 14 years of age.
Advantages;
No further need for welfare, charity, volunteerism.
Ideally a block of land to be accessible for aspiring market gardeners/home building/ small farming/engineering shops.
I am interested to know how the researchers concluded ‘that would have to be funded by extra taxes, plus cutting on unemployment and child allowances.’ Given that automation is a major cause of unemployment, can we use corporate taxes, taxes on IP, and on wealth as a way to fund this. The report seems to imply that the extra taxes will be a burden on indidvidual taxpayers. I am genuinely interested in feedback. Open to any suggestions, answers.
Company taxes are always transferred to consumers. The simple reasoning that big companies can be taxed more severely without hitting consumers is a joke. Big companies will never lower their profit margins after an increase of tax. We have seen this last few months in the Netherlands, where the government changed the low VAT rates from 6 to 9 percent; in increase of prices with 3 pro-cent point of VAT.
Dear reader,
Could we consider another source of funding for UBI than taxes?
There is a tremendous invisible tax streaming to the primary creators of currency which comes out of the buying power of savings and wages.
Please see this short essay on the subject
“how-to-pay-for-universal-basic-income” on the website cited (the url gets blocked by akismet)
Thank you
This study appears to highlight one of the weaknesses of some proposals for universal basic income – where is the money going to come from?
If you are going to increase taxes and reduce benefits for the middle class and the poor then it is unlikely that universal basic income will result in a net benefit to most people.
One of the best ways to pay for universal basic income is through a carbon tax or fossil fuel fee, as in carbon fee-and-dividend as proposed by Citizens Climate Lobby.
A study by Citizens Climate Lobby found that 2/3 of families would break even or come out ahead.
That’s because the wealthy tend to use more fossil fuels than the poor. They have multiple residences, yachts, private jets and so on. They also often own shares in fossil fuel companies, which would be hard hit by a fossil fuel fee.
In fact, the top 1% of earners produce six times as much CO2 as the bottom 10%.
Funding a UBI by a progressive tax on the top 20% of income distribution—-just a small extra tax on ‘upper middle class in 80-90th percentiles, and then a gradually increasing tax on those in the top 10% to top 1% —-i think could fund a UBI without having to cut social services for anyone.
Its really a negative income tax. The only people who would lose are those who could no longer afford to get a new private plane every year. And others who might have to forgo one expensive coffee at a cafe per week and instead make it at home.
Combining it with carbon taxes and other ‘sin taxes’ (gambling, junk food, drugs and alcohol, weapons—-these would not be banned but just made more costly to pay for their ‘externalities’) would be even better. Do both.
I think taxes would not have to be raised, this is a misunderstanding. There is a real lot of money that goes into business subsidies and diverse “political causes”, even unbelievable NGOs, there is a lot of bureaucracy in the process of redistribution, lots of intransparent money flows from budgets. All this could be abolished and replaced with a simple UBI, then also all the benefits that were lower than the new UBI could be abolished, etc. and everybody would be better off. UBI should not be as high as preventing need to work, though. It should be basic.
That’s something I didn’t expect to read today: Marx argues against redistribution of wealth.
This report is garbage, why should UBI be paid with low and middle class tax money when automation is the reason we need to have UBI on the first place? A carbon tax would work much better, as well as a progressive taxation system, where the more you earn, the more you pay. If you are a billionaire (not millionaire), then you should be paying 90% taxes above that billion
they also have not accounted for the potential increase in salaries created in a market that has a greater demand for labor than supply. the job demand it would create if implemented on a bigger scale would be huge and unaccounted for in a study of this size, as it is estimated that there would be a 301% increase in new businesses created according to some studies at least short term. long term Ubi is the only sensible solution to the increasingly worryingly trend of automation which will most definitely impact the number of people in poverty and therefore less tax revenue will be generated for the government long term and lead to insufficient government services. this is a flawed study is looking at only the present, not the future and only basing the funding off higher taxes for individuals rather than creating the same revenue by using more efficient non-avoidable taxation method for big business and possibly a 0.1 percent levy on all transactions.
Before anyone starts a conversation about UBI there should be measures in place to determine the benefits or costs. Currently, we do not have good measures that everyone agrees to. if we measure the amount of money in a household income — that is a fleeting measure as UBI will cause inflation and flight of capital and jobs.
if your job paid you 1,000 a month and UBI provided 600 a month what is your marginal propensity to work for the extra 400? I do not know nor do governments.
When the money is just given out it does not help the people with the greatest issues. In Canada, we are currently giving everyone 2,000/month (for COVID). What I have seen is the people I work with have taken the money and spent it poorly. Also, the people that are on social assistance are there largely because they do not effectively manage their lives. giving more money to them will mean that the problems will not go away but the money will disappear without benefit.
I know some will say but we will reduce the cost of delivery and increase the net benefit. I see on a daily basis the ineffective workings of the government agencies but they do provide value and structure for many people. Social services organizations will still be needed with UBI !!!
So if you increase the cost of providing Goods and Services (UBI puts the government in competition with employers) all the services that are not geographically bound will go elsewhere. It will also change the math for more automation and outsourcing to lower cost jurisdictions. We are in a global market.
UBI will not work for many reasons but the clearest is that people often do not work because of the joy of the activity but for the joy that work affords them. We will, in general, reduce the incentive to work and then we all lose.