Comment on Open Thread, May 19 - 25, 2014

Wed, 21 May 2014 06:57:44 GMT

The advantage over the basic income system is that it would be considerably cheaper, since these goods and services would only be used by a part of the population. The advantage over the means-tested system is that people will still be allowed to use these goods and services if their income goes up, so it doesn't create perverse incentives.

The universal basic income schemes that seem the most reasonable to me adjust the taxation so that, while the UBI itself is never taxed, if you make a lot of money then your non-UBI earnings get an extra tax so that the whole reform ends up having very little direct effect on you. In effect, that ends up covering the "only used by a part of the population" criteria. The perverse incentives can't be avoided entirely, but they can be mitigated somewhat if the tax system is set up so that you're always better off working than not working.

For a concrete example, there's e.g. this 2007 proposal by the Finnish Green party. Your working wage (in euros per month) is on the X-axis, your total income after is on the Y-axis. Light green is the basic income, dark green is your after-tax wage, red is paid in tax. According to their calculations, this scheme would have been approximately cost neutral (compared to what the Finnish state normally gets in tax income and pays out in welfare).

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