Welfare benefits and how you provide for the disadvantaged is one of the primary distinguishing features of the difference between the left and right of the political spectrum. This post is a more detailed explanation of a proposal I put in a comment on child poverty, one of the outcomes where wealth is poorly distributed, something we are seeing more commonly in NZ. It would require consensus from most people to implement as it would fundamentally change the fabric of society.
It asks people (sponsors) with income to redistribute it to others (sponsored). The sponsored may have insufficient or no income or simply less than what the sponsor does. They may have no or little income as they work in areas which do not generate income such as many voluntary activities in society today or they are unable to work in an income generating job because they are disabled or sick in some way. These people can and do contribute to society but are often uncompensated for it. Alternatively they may just wish to not work (paid or otherwise) or contribute at all which is their choice. Such individuals will likely receive the minimum income. If they want more they will need to seek out sponsorship which I expect would be given if they can show some justification for it.
This is how it would work. I think the actual numbers would be different depending on the taxation requirements of society and I am planning to try and do the numbers to verify the feasibility. Perhaps someone else with the right tools and information might like to do some economic modelling as well.
Taxation would be used to encourage the distribution of income so that those who earned large incomes and wished to reduce their tax obligations would be able to redistribute income to nominated people. If they did not then they would be taxed at a higher rate. People being sponsored would have to declare that they were receiving income and be taxed on that income level. It is in effect income splitting to reduce tax obligations and support other members of society. It would not say between who the income would be split as it is not intending to dictate any particular social relationship such as marriage and recognises the complexity of social relationships in today’s society. It is simply a financial relationship.
There would be a tax free level of income and a maximum income after which any income earned would go to the government. The maximum level would be some multiple of the minimum. If for example it was decided that $20K was tax free and the maximum was 20 times that amount then any money earned over $400K would go to the government. Taxation would progressively increase the more you earned. Both the band and the tax rate can be varied giving a great deal of flexibility. Then if they wanted to raise maximum incomes then they would have to increase the minimum tax free amount. Lowering of the minimum tax free level lowers the level of the maximum income. This would truly change everybody’s level of wealth depending on the success of society as a whole.
People who did not receive sponsorship would be sponsored by the government or matched with someone who wanted to sponsor another. All benefits would be abolished as a result and it would in effect provide a universal income.
An old argument against increased taxation on the more you earn is it discourages people from achievement. I think that is a myth in the same vain as trickle down. Once people have a certain level of wealth it has been shown that they look for other means of demonstrating success. One way of doing that is by indicating how many people and at what level you support others. Make the competition not about how much you earn but how much you are able to distribute as the measure of success.
The government’s role would be as an administrator keeping track of who was sponsoring who and tracking the income each person was receiving and taxing appropriately. It would provide enforcement and dispute resolution as well.
It probably is not the only tax change that would be required as it is likely to leave a hole that can be filled by some sort of capital tax which can be discussed later. Business taxation may also be changed to favour the use of labour rather than capital so increasing the reward for labour over capital. That would have to be balanced and thought about carefully as obviously a poor application would be decrease efficiency of production. The productivity rewards of business have swung too far towards capital and that imbalance should be addressed. All of this will require mathematical and financial modelling to prove the feasibility.
It would have the benefit of creating a more socially cohesive society. People would know that they were contributing to the welfare of individuals they had chosen and not those that they think of as ‘bludgers’. People would have the dignity of an income rather than a benefit. They would have an obligation to sponsors just as employees have to employers. This is missing in the welfare benefit situation. They would be free to contribute work to society that did not require an income being generated from the work. There would be many other benefits and probably a few problems but I think the benefits would outweigh those significantly. It would create a more equitable, dignified and just society.