VAT is a regressive tax... but... what if?

All we ever hear is about the need of Fiscal Space so that Governments can have some flexibility

But oh so little about the need of People Space... some flexibility for the citizens.

So just letting an idea out!

Yes, VAT is a regressive tax... but what if?

It becomes one fundamental source of funds for a Universal Basic Income?

Or it is just shared out equally to all?

Yes I know, the redistribution profiteers might panic!

My Universal Basic Income

Again, I don’t like a negative income tax to be associated to a Universal Basic Income.

You do not earn over a set level and you get a supplement from the government.

You earn over a set level and you do not get a supplement from the government.

That is the negative income tax

What has been the real net salary from taking your income from below the set level to above the set level?

What you have been paid in salary, less the supplement you will now not get.

That is not the best way to get people to go out of bed to earn a living.

That means that for you who want to get up of bed to work, to earn more, you then need to earn a salary that includes making up for what you will lose in supplements.

That means you might ask for a salary above your productivity and so the job will not be there for you… just like when a minimum wage is imposed, and many jobs that cannot afford to pay that minimum wage, disappear.

I know those who when discussing basic universal income propose a negative income tax approach, do so out of the very good intent of making the universal basic income seem more fiscally viable. But, in doing so, they are in fact subverting the primary reason for a Universal Basic Income, which is to be there helping to you take whatever job opportunities there might be. Sort of lowering the low hanging fruit for you.

That critical battleground, that no man's land, between jobs being created and jobs disappearing, does not need to be distorted by generals at their desks… that should solely be an area where sergeants with true and real combat experience under fire lead.

In short, better to have a low real universal basic income that can take us forward, than a higher pseudo universal basic income based on a negative income tax that could  stop us... and keep us too much in bed... we know it is important to walk.

What I don't like in the Ontario Basic Income Pilot

I read about the Pilot here 

1. That a person will not be able to retain 100% of what he makes in salaries on top of his universal basic income, biases the pilot in favor of those who argue UBI will diminish the willingness to work.

2. Since the greatest danger for an UBI is that it is set too high from a financial sustainability and incentive distortion point of view… I opine that the pilot, instead of around $1,400 per month should maximum pay $1,000 - $1200. That amount is based on about 50% to 70% of the income that a 40 hours per week employment at minimum wages produces. That said, a general UBI plan needs to start at much lower amounts so as to guarantee its sustainability.

3. Also given the huge transformational impact of UBI, especially in times when structural unemployment is growing, you do not launch a 3-year pilot. You award the UBI in the pilot for life… perhaps picking out the pilot community by lottery.

4. The fundamental principle of UBI is that it is unconditional, so the participants in the pilot should be picked on random not as proposed, by meeting some conditions. In fact the pilot should give us information on how those who really do not need it use an UBI.

Warning! The redistribution profiteers (RPs) are out to kill the Universal Basic Income (UBI) by making it fail.

If you make the UBI too high, let’s say more than 70 percent of what could be earned in the lowest paying full time employment… you are dooming it to failure.

Please start very low, like 35% of the full time earnings at minimum wages and try to enshrine a maximum, like 70% in some type of locked constitutional arrangement. 

If you allow UBI to become a politicians to citizens issue instead of a citizens to citizens affair you are endangering it.

If you allow UBI to be sold and managed as a poverty reducer instead of as an opportunity enabler, it is doomed. 

If the RPs suggest taking on debt in order to finance UBI (so as to keep the value of their current franchise) it will fail, more sooner than later.

Please: Let us avoid the merchants of poverty

Universal Basic Income is for oiling the social machinery, not for drowning it!

Here my reasons for that Social Dividend

My minimum minimorum rules on UBI

It is unconditional (So redistribution profiteers hate it)

It is universal

It is fully paid for (no public debts contracted)

It is large enough to help you out of the bed

It is small enough so as not allow you stay in bed

Don't raise the bar

Give them a step stool instead

http://myubi.blogspot.com/2017/01/my-universal-basic-income.html

My Universal Basic Income

A Universal Basic Income is an unconditional payment of a certain fixed monthly amount to each citizen.

“UNCONDITIONAL” is the key word, so that UBI becomes an uplifting Social Dividend and not a stigmatizing Social Handout.

How did I become a defender of Universal Basic Income?

Two factors: First, as a Venezuelan I have seen how immense oil revenues received by governments for more than a century now, has not been able to trickle down into a sustainable development of my country. I have also, during the last 15 years, witnessed how the 40% poorest in my country received less than 15% of what would have been their per capita share of the net oil revenues. Consequentially I have come to despise all excessive centralization of any redistribution powers, and foremost all witting or unwitting redistribution profiteers.

Second, for a long time, seeing increased automatization (robots, AI) I have been concerned about that if we are unable to provide worthy and decent unemployments to those each day more numerous structurally unemployed, these will not allow us employed to work in peace, and social order will implode.

Putting together the need to get rid of redistribution profiteers, and that the need to adapt to new structural unemployment realities, the Universal Basic Income I propose applies to all citizens of legal working age, who are not being benefited from pensions or other similar schemes.

In other words, the needs of children and the needs of retired seniors should be satisfied, but not by means of a Universal Basic Income. To do so would cause useless confusion about UBI's goals.

UBI is to help you get out of bed, not to help allow you stay in bed. 

A raise in the minimum wage is raises the bar and so there will be fewer jobs to jump up to. A Universal Basic Income is giving everyone a step stool to help them reach up to a job in the real economy.

A Universal Basic Income is a progressive benefit since, on the margin, it benefits the most those needing it the most.

Now, who would be against a Universal Basic Income?

For a starter the redistribution profiteers, because it would clearly eat into the political and economical value and power of their franchise.

Then all those who sincerely think they can decide better on what citizens should spend, the ever-present societal besserwissers, and want to make any such payments conditioned.

Then all those who automatically believe such a guaranteed monthly income would seriously reduce the societal will to work, with dangerous consequences.

Then all those who automatically believe such a guaranteed monthly income would be financially, fiscally, unsustainable.

Possible sources of funds for an Unconditional Universal Basic Income, the Societal Dividend:

Carbon taxes (including gas taxes)

All existing sin taxes, and all those probably too many similar taxes that will be proposed in the future.

An important participation in the ad revenues of those who like Google and Facebook exploit our data.

A minimum minimorum charge for all web contacting (so as to block a bit the over-usage of our limited attention span.

A “Human Heritage Tax”, to be levied on all profits obtained under the cover of Intellectual Property Rights, like patents.

And of course, in countries like Venezuela, with natural resource revenues.

Universal Basic Income is for oiling the social machinery, not for drowning it!

And indeed, even though I am convinced an unconditional UBI is possibly the most intelligent way to confront current societal challenges, like robots and other similar automation substituting for human work, I am also convinced that if a UBI program is not developed with utter care, discipline and love; and kept solely as a citizen to citizen affair, and paid 100% for the generation being benefitted, without burdening the next, then it could result in a lot of bad.

That mainly because it can so easily be captured by other interests, like those wanting to instigate class-wars.

Make UBI payment too high, and then effectively it could reduce the supply of the work-desire that is needed to pay for it. 

Make UBI payments too high and have these not be 100% funded without new debt or printed money, and it will come crashing down on us. In other words UBI needs to be 100% fiscally sustainable, nothing of having our grandchildren pay for our UBI today.

What is my biggest real concern with UBI? The politicians’ “Vote for me because I will give you the highest UBI”

In order to stop politicians and redistribution profiteers meddling with UBI for their own small reasons, there might be a need of a Constitutional Amendment to set up the mechanism and the parameters. 

Don’t wait until it’s too late. Universal Basic Income is better for preventing social upheavals than for curing these.

Canada (home of my grandchildren), please implement the system; start with a low amount, perhaps only $100 per month, perhaps mostly funded with carbon tax revenues, regressive sin-taxes and sales taxes, and take it from there.

Venezuela, please share out the net oil revenues, the most logical funding of its UBI, start at least with $20 per month.

PS. To establish and enforce any lien on a Universal Basic Income (UBI) would of course have to be criminalized.

Don't raise the minimum wage bar, which kills jobs.

Give a UBI step stool instead, to help many reach up to jobs/gig jobs 

Please help us avoid the merchants's of poverty

Friends, if we citizens can’t find a way to defend ourselves against unscrupulous polarization and redistribution profiteers, for instance by means of a Universal Basic Income, a de facto Societal Dividend, we are doomed to forever live in servitude to them.

Friends, if we want to stop that capitalism that wants to benefit, fast and easy, by engaging in that crony statism that centralizing too much resources always ends up causing, and want instead our societal productivity to be fairly redistributed through more efficient free markets, then we must have an unconditional Universal Basic Income.

A UBI should never be allowed to reduce, one iota, the will to get out of bed and work or do something useful

A UBI should never be allowed to reduce, one iota, the will to get out of bed and work or do something useful.

If UBI is to compensate for poverty derived from the lack of opportunities to work, then it could be hellish.

If UBI is to enable more to take any opportunities to work or to be otherwise productively engaged, then it could be God-sent. 

That is why I am not in favor of using a negative income tax model to provide a basic income guarantee. With such a scheme, if as an example the basic annual income was set at $18.000 then if someone earns $13.000 from working, a basic income would kick in with $5.000 spread out in equal payments over 12 months. De facto it means that if you stay in bed you can receive $18.000 annually. De facto it means that for the first $13.000 earned you have actually paid yourself.

It is better to pay for instance only $12.000 annual UBI independent of work, so that there is a stimulus to step out of bed in pursuit of any additional $ of income.

How much UBI should be paid to those in working age 16 - retirement? My rule of the thumb, 70% of what one could earn in the current least full-time paying job.

PS. Children, the sick, and the pensioners should have their needs tendered to separately from UBI.