by Tyler Prochazka | Dec 19, 2015 | News
Interest in the Universal Basic Income (UBI) is sweeping across Europe, with British think tank RSA coming out in support of the UBI in a new report launched on December 17 at a public debate. The Royal Society for the encouragement of Arts Manufactures and Commerce, also known as RSA, is a prestigious institution founded in 1754 and granted Royal Charter in 1847.
Report authors Anthony Painter and Chris Thoung said the current approach to welfare “is no longer fit-for-purpose” and requires a new approach.
“The major concern is ultimately people: the lives we are able to lead, our ability to have a sense of security so we can pursue our ambition, and our ability to contribute to supporting one another, innovating, and developing the creative potential of society,” the report said.
“That is where Basic Income has the potential to be so much stronger than our current welfare state.”
The RSA endorsement follows another high-profile British think tank, the libertarian Adam Smith Institute. They published a report earlier this year also advocating for a basic income in the form of a negative income tax.
The RSA proposal for a British basic income
The RSA report suggests replacing the current welfare state with a UBI that would cost an additional 1 percent of UK’s GDP. RSA’s proposal is modeled after the Citizen’s Income Trust (CIT), an affiliate of BIEN, and derives most of its figures from this framework – read the CIT proposal here.
Under the RSA, citizens between 25 and 65 would receive an annual income of 3,692 British pounds, or £308 per month. People between 5 and 24 would get an annual payment of £2,925, or £244 per month. Citizens over 65 would receive an annual pension of £7,420, or £618 per month. Parents of children under 4 would receive an additional annual payment of £4,290 for their first child, or £358 per month. They would fetch £3,387 annually, or £282 per month, for additional children under 4.
It suggests potentially gradually rolling out the basic income to different demographics, such as those above age 55 and those below age 25. At the same time, a small basic income could be introduced while gradually reducing other benefits.
Regarding housing, the report notes that housing benefits should not be folded into a basic income because of the high cost of real estate in the UK. It proposes a Basic Rental Income. The idea is to utilize property taxes as a means to ensure universal housing income, but the report does not delve into the specifics. Nonetheless, this novel approach does deserve more discussion in UBI circles.
In offering these policy specifics, the RSA illustrates that a UBI is not simply a utopian ideal, as some of its critics claim. In fact, the report points out that far more radical changes to taxes and benefits have been implemented in the past.
Painter and Thoung note that a UBI would help society confront challenges created by rapidly improving technology and an aging population, a point that most other UBI proponents stress as well.
One of the attractions of the UBI, and why even conservatives and libertarians have been drawn to the policy, is its simplicity compared to the current system. Substituting current welfare policy with a UBI would eliminate its “perverse incentives, intrusion and complexity entirety.”
Since the UBI is universal there would be less fraud, they contend. And it would not undermine relationships and families because a UBI would not punish individuals for cohabitating as the current system does. This “strengthening of the family” aspect will likely win over more conservatives to the UBI cause over time.
More entrepreneurship and more time for family and community
From an economics perspective, the report argues that a UBI is the best system to incentivize work and avoid the welfare trap. In the current system, benefits quickly diminish as incomes rise, discouraging beneficiaries from taking up work. The report also claims that a UBI’s safety net allows individuals to pursue risks and creative endeavors. Instead of taking the first menial job available, a worker can spend more time searching for the work most suited to increasing their productivity.
This argument has been borne out by empirical studies on the UBI, such as the basic income trial in India that substantially increased entrepreneurship.
One of the criticisms of a UBI is that it lets some individuals take more time off from work. The key is whether their free-time activities are more valuable to society than their work hours. “Basic Income is a foundation for contribution. It incentivizes work but supports other forms of contribution too,” the report said. It suggests that the UBI would allow individuals to care for the elderly and other vulnerable individuals, which is especially important as society ages.
The actual work disincentive effect has been found to be small. The report briefly reviews evidence from experiments with a negative income tax carried out in the US and Canada between 1968 and 1980. The loss of labor hours for men was minimal. Women did lower their workload more substantially. They chose to spend more time with their family or newborns, activities of high social value. In Alaska under the Permanent Fund Dividend, a policy similar to a UBI, inequality fell in the 1990s and 2000s, while it increased in every other American state.
Another key issue is who qualifies for basic income and whether it would be extended to migrants. RSA’s proposal states that EU nationals should have first “contributed to the system for a number of years” before receiving the basic income. International migrants would be subject to current rules to access benefits. Individuals serving custodial sentences would have benefits restored once their sentence was concluded.
In recent years, the welfare system has lost public support as people demand more rules and conditions for the poor to receive assistance. However, benefit sanctions are becoming increasingly “inhumane,” the authors said. In order to detect tax credit abuse, the system has become overly intrusive into citizens’ lives and activities.
The RSA makes a few recommendations for how the UBI will be applied to the youth, including requiring young adults between 18 and 25 year old to declare how they would use the income. They would sign contracts “with their local community” and not the government, and there should be “no state monitoring” of the contracts, the authors noted. Additionally, those over 18 would have to register to vote in order to receive the UBI.
In suggesting tying the basic income to the community, rather than the government, the RSA report shows precisely the unique potential of the UBI to move away from the impersonal welfare state and toward a more relationship-oriented society. These arguments parallel that of free-market economist Charles Murray in defense of his own UBI scheme.
This report is a serious and comprehensive look at how a UBI could realistically be implemented in the UK. It provides a persuasive look into the economic, societal and moral underpinnings of the basic income. As the debate over the UBI continues to simmer across Europe, the UK will be hard-pressed to ignore this pragmatic approach for a radical overhaul of its welfare system.
Anthony Painter & Chris Thoung, “Creative citizen, creative state: the principled and pragmatic case for a Universal Basic Income,” RSA, December 16, 2015.
Anthony Painter, “In support of a universal basic income – introducing the RSA basic income model,” RSA, December 16, 2015.
Citizen’s Income Trust, “Citizen’s Income: a brief introduction,” 2013.
Andrew Walker, “Think tank floats ‘basic income’ idea for all citizens,” BBC News, December 16, 2015.
Tyler Prochazka, “Would a universal basic income be the ‘death’ of civil society?” Basic Income News, November 21, 2015.
Maz Ali, “Money. For free. It’s been tested in Canada and India. Now one Dutch city wants to give it a whirl,” Upworthy, September 4, 2015.
by Tyler Prochazka | Nov 21, 2015 | News
The most common criticisms of a universal basic income (UBI) are that it is unfeasible and too expensive. However, in a recent series on UBI in the Washington Post, some of the strongest attacks dealt with the possibility that it may undermine civil society in the United States.
Jonathan Coppage, associate editor of The American Conservative magazine, argues that a UBI provides the freedom to “no longer be needed” by the marketplace, where many societal bonds are formed. A UBI would remove these ties, Coppage said.
In India, a UBI trial demonstrated instead that a UBI has the potential to increase entrepreneurial and economic activity. Also, unlike the current entitlement system, UBI benefits do not diminish as income rises, so replacing current social services with a UBI can actually encourage individuals to enter the marketplace.
A cautionary tale does emerge from rentier states in the Middle East. Rentier states, such as Saudi Arabia and Qatar, use oil revenue to provide their citizens with lavish social services in order to buy loyalty to the government. Some argue that this environment has contributed to the underdevelopment of rentier states’ civil societies, while others dispute this theory.
Nonetheless, the lessons from rentier states cannot properly be applied to implementing a UBI in the United States. There are far too many cultural and institutional differences (such as the repressive politics of many rentier states) to make these countries a useful case study.
In Alaska, the Permanent Fund Dividend (PFD) provides a more accurate illustration of how a UBI would affect civil society in America. The PFD provides an annual payment from the state’s oil revenues to each citizen of Alaska. It is arguably the closest program to a full UBI in the world.
One of the best measures of the strength of civil society is the level of volunteerism, as it indicates how invested individuals are in the betterment of their communities. Alaska is ranked as having the tenth highest volunteer participation as a percentage of the population in the United States. Additionally, from 1989 to 2006, Alaska’s volunteer rate increased by 10 percent.
Many have made the case that a UBI would increase support for civil society as it would allow individuals to shift some of their time to civic engagement. Although more in-depth statistical analysis would be needed to demonstrate that Alaska’s high volunteerism rate is a partial result of the PFD, it is easy to see why it may be the case; the financial freedom resulting from a UBI allows people to dedicate more time to activities that truly benefit them and their community.
At the very least, the experience in Alaska shows us that a universal basic income in the United States would not be the death of civil society. In fact, it could be the very stimulus civil society needs to thrive.
by Karl Widerquist | Oct 16, 2015 | News, The Indepentarian
Alaska’s small basic income, the Permanent Fund Dividend (PFD), is coming under increasing political attacks as the state’s fiscal crisis grows. the dividend, in place since 1982, has been incredibly popular, but the double-hit of declining oil prices and declining oil production have created a fiscal crisis that has forced the state to look for new revenues. As Basic Income News has reported recently, both legislators and the Alaska public have shown an increased willingness to divert Permanent Fund earnings from the dividend to the state general budget.
As this year’s record-setting dividend checks of $2072 were being distributed, several editorials argued for reducing or eliminating the dividend and using that money to fill the state’s budget gap.
Craig Johnson, Chairman of the State House Rules Committee, recently spoke in defense of the fund, but went so far as to say only that touching the Permanent Fund should be a “last resort” that he does not support, “right now.”
Paul Jenkens, Tim Hale, and Mike Navarre have all written in favor of diverting funds from the dividend, and the Ketchikan Borough Assembly is considering a resolution urging the state to divert funds.
Some of the arguments are as simple as this statement from Tim Hale, “To me, it comes down to one thing: I’d rather lose my dividend than pay taxes.”
Hale’s attitude is very much the opposite to that of the founder of the dividend, the late Governor Jay Hammond, who believe that a dividend was far more important than a tax reduction. The dividend ensures that all Alaskans, rich and poor, share in the wealth of the state. Only people with substantial incomes benefit very much from lower taxes, and how much they benefit depends on the size of their income.
For more information, see the following articles:
Paul Jenkins, “Don’t tax Alaskans until state cuts to the bone and adopts endowment model for Permanent Fund.” Alaska Dispatch News, September 26, 2015
Tim Hale, “Use Permanent Fund earnings to pay for services – and cap dividend at zero.” Alaska Dispatch News, September 30, 2015
Mayor Mike Navarre, “Permanent Fund earnings can help keep state afloat. “ Fairbanks Daily Newsminer, September 27, 2015
Alaska Business News, “Johnson Touts Benefits of Dividends to Local Economy and Vows to Protect PFD.” Alaska Business News, October 2, 2015
Mary Kauffman, “Ketchikan Borough Assembly Considers Urging State to Include Permanent Fund in Fiscal Plan” Sitnews, October 03, 2015
by Michael Howard | Sep 14, 2015 | Opinion
An emerging proposal for a carbon fee and dividend would yield a substantial dividend payment, eventually exceeding the amount of Alaska’s Permanent Fund Dividend, to American households. Citizens’ Climate Lobby (CCL) is proposing a revenue-neutral carbon fee. This would be collected from the companies operating hydrocarbon mines and wellheads, wherever carbon is first introduced into the economy, from which 100% of the revenue would be returned to the citizens as dividends. CCL’s proposal starts with a fee of $15 per metric ton of carbon, then would raise the fee by at least $10 per year (higher if faster carbon reduction is warranted) until environmental target reductions are met.
Using a carbon tax and dividend calculator at the Carbon Tax Center, I calculated what the individual and household annual dividends would be for selected years from 2016 (the hypothetical initial year) to 2039 (the last year available in the calculator). Households are assumed to contain an average of 2.6 people.
|
Individual |
Household |
Carbon Emissions, % below 2005 Levels |
| 2016 |
$264 |
$686 |
13 |
| 2017 |
433 |
1185 |
15.2 |
| 2025 |
1,613 |
4,194 |
30.7 |
| 2030 |
2,247 |
5,843 |
38 |
| 2039 |
$3,325 |
$8,646 |
48 |
Although not a full basic income by any means, a carbon dividend promises to be a significant addition to individual and household incomes, surpassing the average amount of the Permanent Fund Dividend in less than a decade. By 2039, it is estimated the proposed carbon fee would reduce CO2 emissions 48% from 2005 levels, substantially more than the reductions projected for the EPA’s Clean Power Plan.
That sounds impressive, but is it enough? Citing experts at the Tyndall Center for Climate Change Research in her compelling vision for remaking the economy to combat global warming, This Changes Everything, Naomi Klein claims that “our only hope” of keeping global warming below 2°C, “is for wealthy countries to cut their emissions by somewhere between 8-10 percent a year….This level of emissions reduction has happened only in the context of economic collapse or deep depressions” (21).
Kevin Anderson of the Tyndall Center maintains that there needs to be an 80% cut in emissions in the Annex 1 (wealthier) countries by 2030, if we are to meet the 2°C target, and also allow developing countries’ emissions to peak somewhat later. This, he argues further, requires a “de-growth strategy,” a planned period of reduced economic activity. He does not think that carbon pricing will suffice to reduce carbon emissions at the rate required, for the following reasons:
To summarise, if:
- reductions in emissions greater than 3-4% p.a. [per annum] are incompatible with a growing economy,
- the 2°C obligation relates to a twenty-first century carbon budget,
- a 50% chance of exceeding 2°C is adjudged an acceptable risk of failure,
- and Non-Annex 1 nations peak emissions by 2025 & subsequently reduce at ~7% p.a.,
- then the wealthier nations’ carbon budget is the global 2°C budget minus the poorer nations’ budget,
- and consequently wealthier nations must reduce emissions at 8 to 10% p.a.,
- Q.E.D. Annex 1 mitigation rates for 2°C are incompatible with economic growth
James Hansen et al., making somewhat different assumptions, also call for steep carbon emission reductions of around 6% per year.
More ambitious projections
Suppose that we need to reduce our emissions 80% by 2039. How much of a carbon fee would be needed, and how much would it yield in dividends? Starting at $20/ton, and beginning in 2016, with increments of $40/ton/year, these are the results from the Carbon Tax calculator:
|
Tax/ton |
Revenue, $ billions |
Carbon Emissions, % below 2005 Levels |
Individual Dividend (100% return) |
Household Dividend (average of 2.6 people) |
| 2016 |
$20 |
$110 |
14.7 |
$345 |
$896 |
| 2018 |
100 |
451 |
32.4 |
1,394 |
3,624 |
| 2020 |
180 |
708 |
43.2 |
2,153 |
5,599 |
| 2025 |
380 |
1,130 |
60.7 |
3,309 |
8,603 |
| 2030 |
580 |
1,419 |
70.4 |
4,010 |
10,427 |
| 2035 |
780 |
1,635 |
76.8 |
4,476 |
11,637 |
| 2039 |
$940 |
$1,785 |
80.4 |
$4,802 |
$12,485 |
Note that emissions in the US rose around 17% from 1990 to 2005, so to get emissions down to 80% below 1990 levels, the annual increase would need to be at least $45. This would, by 2039, produce emissions 82.7% below 2005 levels, with a fee of $1,055 per ton, yielding revenue of $1,770 billion and an individual dividend of $4,761 ($12,380 for a household). Presumably the lower revenue and dividends compared to the scenario with a $40 increment is the consequence of declining fossil fuel use and a lower tax base. (To reach 82.4% reductions from 2005 by 2030, Anderson’s target date, the fee increment would need to be $70/year. The maximum individual dividend in 2039 would be $4,268).
The carbon fee would constitute a steadily rising percentage of gross domestic product (GDP) in terms of revenue. If GDP were held constant at $19 trillion, the fee would rise from 0.5% of GDP in 2016 to over 9% in 2039. Even if, as is more likely, GDP rises, the fee will still rise at a faster rate than GDP. Estimates for the 2030 US GDP range from $25.5 to $38.2 trillion. The percent of GDP of the carbon fee in 2030 would thus fall between 5.6 and 1.4, respectively.
At first glance, this suggests that the carbon fee would bring a halt to growth, as it would equal or exceed the normal growth rate of the economy (around 2%). However, accounting for the fact that the revenue is being returned as dividends, the effect may be to steer growth in another direction, away from carbon energy, which will quickly become unaffordable.
Of course, all this depends on the soundness of the projections for emissions reductions at various levels of carbon fee. We have no experience with carbon fees accelerating so rapidly. One case study suggests that carbon taxes may not be as effective as one would hope: the Norwegian carbon tax, one of the highest in Europe, resulted in relatively modest reductions of carbon emissions compared to business as usual, and over the 1990s, carbon emissions rose 15%. One problem was exempting industries on account of competitiveness, and another more telling issue was the inelasticity of demand for some forms of carbon use, such as transportation. The record of British Columbia’s revenue-neutral carbon tax is more encouraging, but since it topped out at $30 per ton in 2012, it is hard to extrapolate from that case to the more ambitious targets discussed here.
In the model discussed above, there are no exemptions. But with the more ambitious fee, it may not be possible for demand to shift rapidly enough from carbon fuel to renewables, and the effect of the fee could be mainly to depress demand, and with it economic activity, as has happened in the past when energy prices rise. Then it would appear that rapid carbon emissions reductions would not be compatible with economic growth.
For basic income researchers, I will conclude by noting the tension between analyses such as this, which envision basic income as part of equitable environmental policy and at least a transition period of de-growth, and those analyses that see basic income as an economic stimulus for growth.
by Karl Widerquist | Sep 1, 2015 | News, The Indepentarian
A recent poll asking Alaskans how to deal with the state’s increasingly severe budget deficit found that trimming the Permanent Fund Dividend or PFD (also know as “the Alaska Dividend”) was the most popular solution. The poll also found that a second strategy for trimming the dividend was third in popularity.
-Alaska Dispatch News
The Alaska dividend is the closest program to a basic income in the world today. Each year it pays out a dividend, usually between $1000 and $2000 per year, financed out of the returns from the Alaska Permanent Fund or APF—a savings portfolio of more than $50 billion accumulated from past state oil revenue. Its enormous popularity earned it the nickname of “the third rail of Alaskan politics,” meaning that any politician who touched it died.
This poll might be an indication that the dividend is losing that status in the face of Alaska’s financial situation, which is deteriorating because of the state’s dependence on oil revenues. The state has no sales or income tax. The vast majority of its revenue comes from taxes, fees, and royalties on the state’s oil exports. Not only have oil prices declined by more than 50 percent since 2014, but the amount of oil exported from Alaska has been declining significantly for years. The state is quickly running through the savings it built up in good years, and it is faced with the situation in which it must either make deep cuts in spending or seek new revenue.
Asking Alaskans to respond to several strategies of dealing with this issue, the Rasmuson Foundation found the following:
- 66% of Alaskans agreed with “Using a portion of excess earning from the Permanent Fund to fund public services and programs while protecting the dividend program.” 27% opposed.
- 57% agreed with “Introducing a statewide sales tax.” 41% opposed.
- 55% agreed with “Putting a cap on the yearly amount of Permanent Fund dividends.” 41% opposed.
- 54% agreed with “Reducing oil development tax credits offered by the state.” 32% opposed.
- 41% agreed with “Introducing a state personal income tax.” 55% opposed.
- 16% agreed with “Making deep funding cuts to essential public services like schools, police, health care, and roads.” 16% opposed.
The first option might not sound like a cut in the dividend, but it is. There are no “excess earnings” in the PDF. Every dollar the PDF receives in returns either goes to spending or to generating more returns and higher dividends in all the years to come. Any strategy that defines some returns as “excess” and diverts those to other spending, necessarily means lower dividends in the future. This opinion protects the existence of the dividend, but it does not protect its future growth or even its current level. If any significant amount is taken in “excess earnings,” it will slow the growth of the dividend in the future, and it might even create negative future growth in the dividend.
The poll did not ask people whether they would support eliminating the dividend entirely, but over time either of the two strategies suggested would lead to significantly smaller dividends than what would otherwise occur.
The poll also did not ask about spending the principal of the PFD, which is constitutionally protected. The legislature would need a constitutional amendment to spend down the $52 billion fund, but with a simple majority vote, it could cancel the dividend and use that money to finance state spending. Before the recent fiscal crisis, such a strategy was politically untenable, but the poll shows that movement in that direction might have become politically tenable.
The poll results suggest that Alaskans might view the dividend as a luxury to be distributed as long as the state is booming. If so, it is very different than how most basic income supporters view it: as an essential tool to promote social justice and an important way to show solidarity with economically disadvantaged individuals. Whether this or any other view of the dividend is strong enough to project it during Alaska’s fiscal crisis remains to be seen.
For more information see:
Alex DeMarban, “Poll: Alaskans prefer new revenue over deep cuts, including tapping Permanent Fund.” Alaska Dispatch News, August 13, 2015.
The Rasmuson Foundation, “Alaska Attitude Survey On The State Fiscal Climate.” The Rasmuson Foundation, Conducted July 13 – 21, 2015
Representative Wes Keller, “My Turn: Don’t be snookered, ther’es no ‘free ride.’” The Juneau Empire. August 20, 2015
Rep Les Gara, “My Turn: Open discussion needed on oil taxation.” The Juneau Empire. August 19, 2015.
NOTE: The paragraph beginning, “The first option might not sound like a cut…” was added after this article was first posted in response to questions from readers.
One of the criticisms of a UBI is that it lets some individuals take more time off from work. The key is whether their free-time activities are more valuable to society than their work hours. “Basic Income is a foundation for contribution. It incentivizes work but supports other forms of contribution too,” the report said. It suggests that the UBI would allow individuals to care for the elderly and other vulnerable individuals, which is especially important as society ages.