by In discussions about Universal Basic Income, lots of people are attracted by the idea of making things as simple as possible. Sadly, that doesn’t work well once you take a closer look. The simplest UBI would pay every Australian an amount equal to the single age pension, which is just above the poverty line. That’s 000/yr per person or 0 billion for a population of 25 million, about equal to total Federal government expenditure. That would replace about 0 billion in existing social welfare spending. That leaves 0 billion, approximately equal to total revenue from personal and income taxes. To fill the gap, we would need either to double income tax revenue, scrap all other public spending, or some mixture of the two. Assuming that’s not feasible, we need to start
Topics:
John Quiggin considers the following as important: Tax and public expenditure
This could be interesting, too:
John Quiggin writes The budget’s thylacine-chasing days are over
John Quiggin writes The budget should have been a road to Australia’s low-emissions future
John Quiggin writes Two problems with Modern Monetary Theory
John Quiggin writes How can we reduce inequality in Australia
In discussions about Universal Basic Income, lots of people are attracted by the idea of making things as simple as possible. Sadly, that doesn’t work well once you take a closer look.
The simplest UBI would pay every Australian an amount equal to the single age pension, which is just above the poverty line. That’s $20000/yr per person or $500 billion for a population of 25 million, about equal to total Federal government expenditure. That would replace about $180 billion in existing social welfare spending. That leaves $320 billion, approximately equal to total revenue from personal and income taxes.
To fill the gap, we would need either to double income tax revenue, scrap all other public spending, or some mixture of the two. Assuming that’s not feasible, we need to start complicating things. The most obvious step is to treat children differently, for example by giving them half the benefits of adults. But a fixed payment per child isn’t going to be work well, bearing in mind that it would replace existing forms of support which are based on assessments of need.
The key problem is that while tax is mostly calculated on an individual basis, welfare payments are made to households. To get things right, we need to accept that a complex world doesn’t allow for simple solutions.