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Published: 07 January 2015

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How to determine the amount of unconditional basic income (UBI) ?

The definition states:
UBI should guarantee existence and allow participation in society.

The amount

• will be different in each country according to the cost of living
• will be adjusted periodically to take into account the evolution of prices and possibly other parameters
• children probably will get less than adults

Rules should be simple to avoid administrative overhead. Reduction of bureaucracy is one of the aims of UBI.
It's acceptable that certain persons get "too much" and can save some money or ...

The democratic process to determine the amount will be useful because important questions will be discussed

• Distinguish 'luxury' and needs. What is needed to live with dignity?
• Determine needs not limited to simple survival. For example participation in cultural, political life, ...
• Are we ready for generosity? In case of doubt will we fix UBI at a relatively high level?

The aim is to arrive at a sum which guarantees existence and allows participation the life of society.
It'is possible to pay an allocation which covers needs partly during a transitional phase.

Even a small amount already brings advantages

• Possibility of accepting a part time job or a badly remunerated but rewarding job which you really love.
• Possibility to start studies. It will be necessary to fill the gap with savings, student allocations, holiday jobs, ...
• +- the same advantages as a complete UBI but with some limitations

UBI will replace numerous payments entirely or partly. Payments linked to unpredictable specific needs (e.g. health insurance) should not be abolished.

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Published: 28 December 2014

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Definition of Unconditional Basic Income

UBI is an income granted unconditionnally to each member of a political community.

Characteristics

• garantee existence and allow participation in society
• individual right
• paid without control if the beneficiary really needs it
• no obligation for the beneficiary to work

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Published: 27 December 2014

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What is the consumption tax ?

Consumption tax is another name for Value Added Tax (VAT).

What's the advantage of the consumption tax ?

In many countries paid work is very expensive partly due to heavy taxation.
Investments in machines, ... are often supported by the state with subsidies or reduction of taxation.
This incites companies to increasingly use machines and reduce jobs for human beings.
If we wouldn't tax paid work but mainly consumption, paid work could become more competitive.

We could substantially simplify the complex taxation system if we would replace many complex taxes by a high consumption tax.
This would reduce administrative overhead for the state, companies and private persons.
It would become easier to avoid loopholes in taxation laws.

Consumption tax rate ?

In many countries about 50% of GDP are used for public spendings (infrastructure, education, social welfare, ...) and raised via multiple taxes.
If the consumption tax were the only tax, then the tax rate should be about 50% of selling price i.e. 100% of price without the tax.
The price without the tax would be much lower than in complex taxation systems because it would not already contain many indirect tax costs.
The price including taxes would remain +- the same. Instead of many taxes included in the price we would have a single tax.

Why is consumption tax linked to basic income ?

1. The consumption tax increases the effect of basic income reducing the price of work force

Those with basic income can work for very low wages and live decently.
This causes wages to decrease (at least when the employer offers jobs which are not only financially attractive).
If we tax consumption instead of wages then work force price will become even lower and increase this effect of basic income.
This is good for the economy (products and services will become competitive)
and for employees (employers offer attractive jobs and conditions to attract and retain workforce).

2. Basic income makes the consumption tax socially fair

Consumption tax rates are the same for all.
Basic income is needed to reduce the burden for those with low incomes.

If tax rate were 50% of price including the tax we would have the following situations depending on income added to unconditional basic income:

3. Basic income reduces tax income on wages but not on consumption

With unconditional basic income (UBI) more people will work for lower wages or even unpaid in jobs or for purposes they really like.
Even if more people would work less hours it would be easy to produce enough goods and services because technology and improved motivation would increase productivity substantially.
As only a surplus to basic income will be paid the total amount of wages would be substantially reduced.
Tax income on wages would shrink dramatically.
With basic income people could continue to buy and pay consumption taxes.

Are there loopholes to avoid paying the consumption tax ?

If the tax rate is very high, it becomes interesting to exploit loopholes, even if this is complicated and expensive.

Loophole 1

I buy everything abroad.

As already explained in the description of the consumption tax, the sales price is hardly changed by the consumption tax.
Many small taxes in the cost price are replaced by a high consumption tax. The sales price remains +- unchanged.
Various goods or services may be cheaper abroad. But it can also be the other way round.
The consumption tax does not significantly change the balance of cross-border trade.

Loophole 2

If you want to buy a house, for example, you could halve the price if you did not have to pay the consumption tax.
This is relatively simple.
I set up a company which buys the house and gives it to me for free.
Companies pay VAT on the purchase of goods and services.
When they sell, they collect VAT on behalf of the state.
Periodically, they pay the difference to the tax administration. This corresponds to the tax on the added value created.
My company has paid a lot of VAT and collected none. The difference is negative and the company gets all the VAT back.
This allows it to pay back half of the loan. The house only cost me half. It belongs to my company and therefore to me.
Renovations and running costs are handled tax-free through the company using the same method.
The costs of setting up and managing the company are low compared to the profit made.

Solution 1 (obvious but not good)

Companies have to pay all the collected consumption tax to the state. So they can no longer deduct the tax they have paid.

This is unfortunately bad for small businesses. They buy a lot of production goods and services and pay a lot of consumption tax.
Huge enterprises can produce almost everything themselves (from the individual parts to the final product including various services) and buy very little. They pay little consumption tax.
Small companies would almost all disappear and it would be extremely difficult to start a new company.

Solution 2 (obvious but not good)

"Fictitious" companies are not allowed.

How do you define "fictitious" companies?

If necessary, my company sells some goods or services to be recognised as a "real" company.
If necessary, I pay an employee to clean the house or I pay the company a modest rent or ...

The competition between legislators and "fictitious" companies leads to complicated laws and a lot of bureaucracy. This will generally make setting up companies more difficult and increase the administrative burden to absurdity.
Only rich people will still benefit from the loophole.

Solution 3 (simple but effective)

The state does not pay a negative difference to the companies.

In the example, my company would not get the VAT back and I would have gained nothing.
Negative differences (shortly after founding a company or during seasonal or cyclical bad sales periods) could be credited to later business periods so that small businesses are not disadvantaged in the long run.

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Published: 27 December 2014

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We don't need it

✋ We already have Guaranteed minimum income for the poor (RMG), Unemployment compensation, Minimum income, Benefits for children, ...

Unconditional Basic Income (UBI) has important advantages (See page Arguments/advantages).

We support only those who need it (social selectivity)

✋ Those who have enough income don't need financial help from the state.

✋ This would be much easier to afford.

Unconditional Basic Income (UBI) has important advantages (See page Arguments/advantages).

With UBI you could considerably reduce other expenses. E.g. Guaranteed minimum income for the poor would be replaced by UBI, Retirement pensions and Salaries of civil servants would be reduced by the amount of the UBI, Employers could reduce salaries by the amount of UBI (and pay more taxes), ...

If you get Guaranteed minimum income for the poor (RMG) or Unemployment compensation it's not financially interesting to accept poorly paid work because amounts paid by the state would be reduced or canceled. In some cases you would have to reimburse RMG. With UBI you would benefit from every Euro earned (perhaps reduced by (low) tax rates).

UBI would not be affordable

✋ With simplistic calculations you can show that UBI would ruin even rich countries.

Miscellaneous models to compensate the expenses have been described during the last decades. If you find a bad one continue to search! Several models might get good results.

Unconditional Basic Income (UBI) allows to reduce or eliminate several considerable expenses. E.g. Guaranteed minimum income for the poor would be replaced by UBI, Retirement pensions and Salaries of civil servants would be reduced by the amount of the UBI, Employers could reduce salaries by the amount of UBI (and pay more taxes), ...

UBI has a positive impact on the economy (See page Arguments/advantages). This increases total income of the state.

Few people would get (much) more money than today (if you reduce other expenses). So it shouldn't cost much more than the current system.

UBI has important advantages (See page Arguments/advantages). It's ok if this has a considerable cost.

UBI should be introduced progressively. E.g. begin with a small amount and increase it in several steps, include more and more categories of persons (children, students, poor, retired, unemployed, ...). Then people would understand that the impact on the state's budget is low or even positive. It would allow to adjust the accompanying measures to compensate the expenses.

People would stop working

✋ There is a risk that more people than today wouldn't work or at least work less. (Already today most children and old people don't work, many people are searching unsuccessfully for jobs, some even don't want to find a job).

Globally people do more unpaid than paid work (for family, associations, ...). Salary is not the only reason (and certainly not the best) to contribute to society.

Most people want more than the minimum. With UBI most would continue working to afford more.

Polls reveal that most people would continue working if they got UBI (the same job, perhaps less hours or change the job).

Most people who would stop paid work would continue to contribute for family, associations, art, research, politics, ...

Due to better technology we need less people to produce enough.

Nowadays many people lack motivation and deliver badly. Their productivity is far from optimum. They should leave their current job and choose something they really like to do.

People who freely choose their job are motivated. Their employer cares for good working conditions. This increases productivity. We need less working hours to produce enough.

Those who live on UBI couldn't afford high consumption and thus reduce negative impact on the environment (climate, pollution, ...).

That's communism?

	Communism failed due to Absolute power of the "representatives of the people" Very powerful bureaucracy Repression of initiative and freedom
	Unconditional Basic Income (UBI) is better than communism Personal initiatives get boosted Everybody may have a successful life if he really wants UBI reduces bureaucracy UBI gives people maximum of freedom

Social tourism

✋ Migrants might invade our country to get Unconditional Basic Income (UBI).

This problem exists already today. Many people try to come to the rich, democratic countries hoping for a better life. Current solutions should work even in a future with UBI.

UBI should be introduced simultaneously in all European Union countries. If it works well the other countries will follow the example. Or introduce UBI first in the poor countries.

We should help people in poor countries and increase development aid budgets. Development aid should be paid as UBI to the people and not to corrupt or inefficient institutions. See Pilotproject in Namibia which shows that this is very efficient.

Jealousy

⚡That's finally the real problem.

Nearly everybody knows people who shouldn't get UBI (the neighbour, foreigners, lazy youngsters, rich capitalists, ...). That's why Unconditional Basic Income (UBI) is considered a bad idea.

♫ As this is not a "good" argument people stick to other arguments to justify their refusal of UBI.

Negative income tax is better

A negative income tax only covers the amount missing to get a basic income. That costs a relatively small amount and could be introduced more easily. This would eliminate poverty.

But with this solution it would be financially uninteresting to accept a job if the salary is not considerably better than basic income. Negative income tax would make black labour very attractive at least in the low salary sector.

With Unconditional Basic Income (UBI) every paid work is financially interesting because UBI is not reduced if you earn money.

UBI has many more advantages compared to negative income tax (see page Arguments/advantages) like reducing bureaucracy, positive impact on the economy, ...