Five Broken Things.

Written By: - Date published: 7:56 am, February 16th, 2013 - 81 comments
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Universal Basic Income UBIYesterday I rather shamelessly threadjacked one of Irish’s posts on a Colin Espiner column in the direction of the Universal Basic Income idea. In this post I want to also shamelessly filch from Gareth Morgan’s book The Big Kahuna, specifically Ch.5 “The Five Big Issues” and wrap it into a quick read. (At some points I’ll be pretty much lifting words direct from the book.)

Morgan identifies five principles that a good tax system would achieve, namely: vertical equity, horizontal equity, individual responsibility, efficiency and adequacy. Here’s my take on what he’s saying:

1. Vertical Equity. In the broadest sense this means the big players in the system, businesses and speculators, should not have unfair advantages over the smaller players like ordinary workers and beneficiaries. Instead our existing system deliberately allows numerous ways for those who have capital, wealth and access to good tax lawyers to avoid paying their share of tax, or allows them to re-arrange their affair to access benefits like Student Loans, Rest Home Care and the like … which they are not entitled to.

As Warren Buffet stated, he’s paying less than 15% tax overall, while his secretary pays over 30%. While locally there is the story of a farmer who owned properties worth tens of millions presenting a Community Services Card. The left has long denounced this kind of gross unfairness.

2. Horizontal Equity. This is the idea that like cases should be treated in like fashion. Because our current system is a inchoate mess of targeted benefits and tax credits, it is riven with inconsistencies. If you cannot work because you’ve had an accident you’re better off than if you have fallen ill. If you are in a job you’re family support via WFF is more generous than if you have the same children … but just got made redundant. If you are unemployed and your partner is over 65 you both receive Super at the couples rate, while if your partner is 64 you don’t.

Or an employee pays for his or her transport to work from after-tax income; while the owner of the business makes the same trip in a vehicle paid for from before-tax expenses. A landlord can claim the mortgage interest as a pre-tax expense; the owner-occupier of the same house cannot. And so on; there are any number of examples.

All these inconsistencies undermine people’s sense of faith in the system and fuel resentment.

3. Individual Responsibility. A well-designed tax system would encourage self-reliance and avoid stigmatising those who cannot achieve it. The current system puts barriers in the way of both these goals.

The big one is the very high marginal tax rates that are inherent in any targeted tax/benefit system. I cannot emphasis this more. A person say with one child and an accommodation supplement will find that if they move into a typical median wage job they really are not all that much better off … especially when you take into account the extra expenses they incur by working. (It’s a remarkable fact nonetheless that so many people will still choose to work despite the lack of ‘economically rational’ motivation to do so.) Nonetheless when the right talk about ‘welfare dependency’ they have a point; the current tax system certainly creates poverty traps that those with minimal motivation are unlikely to try very hard to leap over.

Much the same sort of problem exists with WFF; to avoid abrupt transition effects the abatement rate has to be set so low that incomes over $100k are still obtaining a portion of it. This doesn’t make sense in terms of the claimed purpose for WFF, while creating perverse, unintended incentives in the labour market place.

The current system pits self-interest against community interest; while an intelligent system would align them.

4. Efficiency. The total cost of administering our current system is much higher than most people imagine. Morgan notes that in 2010 the Ministry of Social Development (MSD) had a budget of $20.3b. Total payment transfers amounted to only $16b. Of the $4.3b gap he estimates $0.7b was incurred for reasons other than it’s redistributive function; leaving some $3.6b in costs. That’s an astounding 6% of all tax revenues for that year! It’s almost a quarter the size of the Health budget … just on the cost of running this absurd house of cards.

And this does not count the costs that IRD incur around WFF and Kiwisaver. The creakily ad hoc nature of the current system means that virtually every taxpayer needs to be dealt with on a case by case basis.

But those are the direct costs. A rational tax system would encourage people to invest their wealth in economically productive activities that would enable the nation to prosper. Instead it has more or less pushed us all the wrong directions, housing being the most obvious example. The economic costs of these distortions are impossible to calculate, but one only has to look at the absolute paucity of good companies being listed on our stock exchange, or the chronic inability of New Zealand-owned companies to capture their real potential in the global market to have some idea of the lost opportunity.

5. Adequacy. There are far too many people, and their children, living in poverty. Their access to the common good and prosperity of the nation if filtered through a layers of meanness, snobbery and indifference. No-one reading this blog is in any doubt of this. Despite all the immense cost of our redistributive system, it still leaves too many people in deprivation.

Worse still “too much government expenditure is currently directed towards ameliorative programs which primarily serve to contain a problem at a point where the possibility for change is lost”. The right has a legitimate point when they complain that too much of ‘their tax money’ is wasted.  We have $16b of transfer payments in this country … and we still have poverty? Something isn’t working here.

On all five of these underlying principles our current tax and redistributive system is completely broken. Another round of reforms, another Ministry reorganisation or re-branding exercise will only kick these broken bits around. Worse still it opens the door to Steven Joyce exploiting the opportunity to impose his own version of ‘crisis capitalism’ onto the system .. reforms that will use soothing and deceptive language … but in reality subvert these principles even further.

The UBI idea is not new. It has a long intellectual history; Keith Rankin and Gareth Morgan have done much groundwork locally. The Greens have a substantial history with the idea themselves. But if we want a new Labour/Green government to be anything other than yet another crew of passionless deck-chair re-arrangers the left must be able to articulate exactly what we want in a new deal. Tax and welfare are the two most invasive and potent of all things our governments undertake; it’s time to start creating a coherent political narrative the people of this country can understand and believe in.

81 comments on “Five Broken Things. ”

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  1. Colonial Viper 1
    16 February 2013 at 8:45 am

    While locally there is the story of a farmer who owned properties worth tens of millions presenting a Community Services Card. The left has long denounced this kind of gross unfairness.

    You’ll find that a lot of National voters absolutely hate situations like this with a vengeance too, and would support it being stamped out asap. A typical example would be a corporate manager on a good salary, say $150K pa, putting two kids through university, and having to put in a substantial sum of money for both childrens week to week expenses flatting in another town.

    Yet his farmer mate, whom he knows is considerably better off than him in both wealth and income, well the farmers kids get $1600 in student allowances per month in total, while his own kids get zip.

    • RedLogix 1.1
      16 February 2013 at 8:54 am

      You’ll find that a lot of National voters absolutely hate situations like this with a vengeance too, and would support it being stamped out asap.

      Yes … that’s exactly what happened. Which indeed is how I got to hear the story in the first place. I didn’t intend for it to be read as an ‘anti-farmer’ line… merely an example of how those with capital have opportunities to squirm through loop-holes that should not be there.

  2. Sosoo 2
    16 February 2013 at 9:06 am

    All this is just talk. It’s all very well to invent schemes such as this, and this one is one of many, but its a political problem at root. There are a sufficient number of New Zealanders who are fundamentally mean spirited and/or desirous of an unequal/hierarchical society to make such schemes electoral poison. Unless you find some way of removing these people from the political equation, a GMI is a pipe dream. For example, WFF only has the high support it does because wealthy people can rort it, and they do in large numbers.

    If you have some cure for the 30% of New Zealanders who are authoritarian assholes I’d like to hear it.

  3. saarbo 3
    16 February 2013 at 9:20 am

    RL, There is a lot in this post, but one Labour policy that goes a long way to sorting some of the problems you have noted i.e: “As Warren Buffet stated, he’s paying less than 15% tax overall, while his secretary pays over 30%.” is the implementation of a Capital Gains Tax. But it needs to be implemented at full tax rates, rather than getting a 50% discount, which is why it doesn’t work as well as it should in Australia.

    Farmers often get Community Services cards because when dairy production payouts are around the current $5.90 kg ms, farmers are actually making losses. This may be despite the fact that they have 4 farms, which when they eventually sell will make them several million dollars in capital gains. There is no reason why these capital gains shouldn’t be taxed.

    • RedLogix 3.1
      16 February 2013 at 9:29 am

      The UBI is only part of Gareth Morgan’s proposals; a comprehensive CGT is another crucial element.

      But Gareth’s CGT is somewhat different to Labour’s; in particular it points up the necessity of capturing ALL asset classes, including shares and the family home. Leaving exemptions only creates more distortions and unintended consequences.

      Another question around CGT’s is whether they should be assessed on an accrued or time of sale basis. The relationship between capital gain and cashflow in a business is a complex one with many aspects to consider.

      I’ll try and put up another post on this later.

      • Colonial Viper 3.1.1
        16 February 2013 at 9:53 am

        Does Morgan say anything about a straight asset tax? On property it could be something similar to local council rates.

        It would make the accumulation of piles of unproductive assets that much less attractive.

          • Colonial Viper 3.1.1.1.1
            16 February 2013 at 3:23 pm

            Gosh darn it, that man has thought of everything. Thanks geoff.

          • saarbo 3.1.1.1.2
            16 February 2013 at 4:48 pm

            The CCT is interesting, something such as this asset/capital tax would certainly go some way to improving what is happening in our farming community. Having recently shifted back to the countryside, I discovered that the farmer on one side of our family home owns 8 dairy farms in our district and the farmer on the other side owns 6 farms. Fifteen years ago all of these farms were individually owned. Their farms are still being operated as standalone units using CONTRACT managers. The managers are paid approx. $50k, they must pay for all of their own cover for days off and holidays. The affect on our community from these farmers accumulating farms in my opinion is:
            1) There is a clear class system being developed with the farm owners sending their children to private boarding schools while the workers children go to the local public school. The workers and farm owners dont mix socially.
            2)The Contract managers are under immense pressure, they dont give themselves time off, recently we had a child from one of the farms come over to our home in a distressed state because of physical threats from her parents, we are currently dealing with this in conjunction with our local school.
            3)The farms are being operated at around 70% of their potential, I reckon if these farms were owner operated they would be producing significantly better. So this is clearly an economic development issue also.
            4)The 50/50 share milking system was a good way for farm workers to step up to farm ownership but greedy farm owners now use Contract managers and take a bigger slice of the income so that they can accumulate more farms. There is a trade off in farm production but farm owners are prepared to forgo this additional production as they receive more income using Contract managers.

            I reckon if New Zealand wants to optimise its farming land then there needs to be a return to owner operated farms. What is currently happening is not only sad from a community point of view but is sub optimal from an economic point of view. Something needs to be done, a capitals gain tax may help. A CCT may also need a deeper look.

            Labour has an opportunity to get farm workers on board because they certainly are not getting any protection from National. Given the structure of farm ownership, I would imagine that there are a lot more farm workers than farm owners. Labour needs to develop policy in this area to protect farm worker rights, if they can encourage farm worker solidarity in this area they could shift a number of voters from National to Labour.

            • Draco T Bastard 3.1.1.1.2.1
              16 February 2013 at 6:21 pm

              3)The farms are being operated at around 70% of their potential, I reckon if these farms were owner operated they would be producing significantly better. So this is clearly an economic development issue also.

              Doubt it. I suspect that if the farmers who owned those farms were running them as well it wouldn’t change at all.

            • David C 3.1.1.1.2.2
              16 February 2013 at 7:56 pm

              Interesting. I have had the good fortune of recently meeting a contract farm manager in Hawkes Bay.. I sold him a section at the beach. he is maybe 30 yrs old recently married and with a 1 yr old daughter. great family. he is a hard working lad with a hard working wife. both graduates. they own a house and a beach property now and are loving life. I have been on the property he works. It is imaculate and earning near top end of potential. His bonus payments refect this hard work.

              • Colonial Viper …
                16 February 2013 at 8:29 pm

                Break up big farm properties and give people like him a chance of owning their own farm.

              • saarbo …
                16 February 2013 at 9:22 pm

                There are cases where responsible farm owners set up good structures for their contract farmers, but unfortunately there are not enough of them. I can assure you that the Contract Managers in our area are struggling, a beach section would be a dream to them.

                But you hit something on the head when you mentioned (or should have mentioned) that the farm managers were a couple, because that is another thing farm owners often demand, that a couple apply for one job, so that they essentially get 2 people for the price of one.

                The other thing that is rare about your case is contract farm workers buying a beach section, A) most farm workers have a desire to one day own a farm and save money for this and B) Not many contract farm workers give themselves time off to enjoy holidays.

                Workers need their rights protected from unscrupulous farm owners.

    • jim 3.2
      16 February 2013 at 2:54 pm

      Don!t disagree with capital gains tax,even better M.T.T.As for the fairness of a community services card for a landed or many property landed farmer should be exempt, as their greed and servicing of their debt, mortgage is of their own making.

  4. Afewknowthetruth 4
    16 February 2013 at 9:26 am

    Tax will soon become irrelevant; just look at what is happening in Greece: the tax take is imploding as the economy collapses., and the few people who do have income are avoiding paying taxes wherever possible. Britain has a similar problem, as GDP fall and retail sector declines. under ‘austerity’. Japan is ‘kaput. The US is running a faux economy based on money-printing and war.

    Okay, it will probably take another couple of years for NZ to reach a situation similar to that of Greece but there certainly is no time to fix anything within the present system.

    • RedLogix 4.1
      16 February 2013 at 9:33 am

      I don’t disagree AFKTT … but I’m still willing to back this idea because at heart I see it as not just a reform to the existing capitalist system, but opening a door to allowing the kind of innovation and change of values that just might …might make a difference.

      Hopeless romantic that I am….

      • Colonial Viper 4.1.1
        16 February 2013 at 9:43 am

        You’re not wrong RL. In the absence of effective change directly preparing for Climate Change and Energy Depletion, we can focus on the wellbeing, health and fitness (mental and physical) of the population.

        So when hard times hit and tough work needs to be done, the people of the country (and its administrative systems) are ready for it.

      • Rogue Trooper 4.1.2
        16 February 2013 at 2:39 pm

        that’s from a Steve Earle song too 🙂

  5. just saying 5
    16 February 2013 at 10:12 am

    Really glad you’ve turned this discussion into a post of its own, Red Logic.

    Though I need to do stuff now, I look forward to reading the conversation later.

    There’s just one thing I want to mention now, and that is the gross inequality that would be the starting point for a UBI. A gaping chasm between the rich and poor in resources in the widest sense – certainly material wealth, but also, health, support systems, ability to generate more resources, and/or collaborate with other resource-rich people, middle-class nous (for want of a better term), education and skill-sets. It may be that in the long-term, some degree of inequality and poverty may be ameliorated, but why should the most deprived have to continue to wait for some theoretical future in which they get a place at the table, (if they are really good).

    Flat tax, may mean the richest would end up paying more tax than they do now, but the rich owe a lot more than that, particularly to those who have been unjustly deprived by a rigged competition in which a few have already made off with most of the loot.

    Btw, children*are* people.

  6. Bill 6
    16 February 2013 at 10:58 am

    A substantial hurdle UBI faces is the simple fact that it runs counter to one of the basic dynamics of the class war. A livable income as envisaged by UBI would mean that no-one would feel compelled to undertake soul destroying and useless jobs, meaning that no-one would profit from creating soul destroying and useless jobs. And the ‘right’ to mercilessly exploit isn’t one that’s just going to be given up.

    One powerful and incontravertable argument that I believe should be made against the preservation of the privilege to exploit, is the simple fact that our climate and civilisation can not and will not survive the flow on effects of our current market system. Given that, UBI should be argued as being one component of a raft of measures needed to help us carry out the necessary winding down of our market economy.

    Resistence to such a move (ie, a defense of the status quo) then becomes condemned as a position arguing for the inevitable short term demise of civilisation alongside the trashing of the climate. And that’s not a position anyone would have any success defending.

    • Colonial Viper 6.1
      16 February 2013 at 11:08 am

      Resistence to such a move (ie, a defense of the status quo) then becomes condemned as a position arguing for the inevitable short term demise of civilisation alongside the trashing of the climate.

      Although the above is correct, the political messaging needs to be more along the lines of:

      – The current system is wasteful, complex and full of unequal treatment and unfairness.
      – The current system leaves too many people struggling and suffering while giving too much to those who do not need it.
      – Its time for a transparent, simpler system where money and effort is spent looking after New Zealanders and not on massive bureaucracy.
      – The new approach fits in perfectly with calls for a living wage.

      • Bill 6.1.1
        16 February 2013 at 11:56 am

        Don’t know about that political messaging CV.

        ‘Everybody’ already knows the current system (ie, capitalism) is unfair, wastful and so on. And those arguments have ebbing and flowing in one form or another for the past 150 years or so. They don’t arrive at a conclusion but merely push or pull the tide of opinion this way or that.

        We don’t have time to continue with intellectual games that adopt theoretical positions in line with known pro’s and con’s of the market. We need to cut to the quick. We need to push the central and pressing problem front and center and force those unwilling to accept movement to justify their position and deny them the opportunity to obsfuscate or avoid matters by playing games based on economic theory.

        Even if Capitalism was made more equitable – even acceptably equitable – the fact remains that market driven production and consumption or distribution will simply see us, our civilisation, driven out beyond the edge of viability.

        (And before anyone is tempted to jump in here and wank on about the failings of industrial command economies as a round-a-bout way of justifying market economies on the grounds that they are a lesser of two evils, my argument is that both those types of economies are unfeasible – absolutely stupid and dangerous options – given the real world situation of climate change)

        • Rogue Trooper 6.1.1.1
          16 February 2013 at 2:40 pm

          Yep

        • Colonial Viper 6.1.1.2
          16 February 2013 at 4:15 pm

          All good, but unfortunately we don’t have any political grouping in NZ (including or excluding the political parties) or media outlet who will make these points.

          ‘Everybody’ already knows the current system (ie, capitalism) is unfair, wastful and so on.

          I suspect that very large numbers of ordinary people are not overtly conscious of capitalism or its mechanics, even though they carry it on their back every day.

        • Draco T Bastard 6.1.1.3
          16 February 2013 at 6:25 pm

          ‘Everybody’ already knows the current system (ie, capitalism) is unfair, wastful and so on.

          Actually, everybody for the last few decades has been told that the capitalist free-market is the most efficient and fair system ever invented. It’s only in the last few years that the facts have started to show that that isn’t the case. It’s going to take awhile before a majority of people hold to the view that capitalism is wasteful and unfair.

    • Lefty 6.2
      16 February 2013 at 11:25 am

      A substantial hurdle UBI faces is the simple fact that it runs counter to one of the basic dynamics of the class war.

      You are so right Bill.

      A good UBI would be radically transformational – the sort of big idea the Salvation Army is calling for at the moment.

      A properly designed UBI would redistribute power as well as income.

      It would also lead to a redefinition of what work is and an incredible increase in level of economic and social freedom we all have.

      I am fearful of what would happen if any of our present political parties and the state bureacracy adopted the idea at the moment though.

      We would probably end up with a Gareth Morgan version of it that made it more of a streamlining of the benefit system than the introduction an unconditional right for each woman, man and child to have a basic income sufficient to meet their needs to survive and participate in society as their share of our common wealth.

      A UBI is really about the state granting this right to each person, and distributing this income to them simply because they exist.

      I think the citizens are probably going to have to make the ruling class and their minions in the parliamentary parties a little more afraid of us before they allow us a true UBI.

      • Lanthanide 6.2.1
        16 February 2013 at 11:51 am

        Gareth Morgan’s UBI was built with the goal of keeping the current welfare expenditure and tax revenue about the same, so the increase in welfare that is inherent in the UBI is offset by his changes to GST, CGT and efficiency from dramatically shrinking the welfare department.

        You could easily come up with a more generous UBI than his ($12k/year IIRC) but you have to have some way to fund it.

        • Draco T Bastard 6.2.1.1
          16 February 2013 at 12:39 pm

          You could easily come up with a more generous UBI than his ($12k/year IIRC) but you have to have some way to fund it.

          That’s easy. The government creates the money and the private banks don’t. Funding is now secured and the economy can be brought into line with reality.

          • Bill 6.2.1.1.1
            16 February 2013 at 1:29 pm

            You do know that no matter how often you state that obvious point DTB, that most people will continue to experience a dismissive ‘whoosh! inside their heads’?

            • Draco T Bastard 6.2.1.1.1.1
              16 February 2013 at 1:41 pm

              Yep, I know. I figure if I state it often enough then maybe people will at least begin to question the present financial system.

              • Rogue Trooper …
                16 February 2013 at 2:41 pm

                Repitition beds bulbs in

              • TheContrarian …
                17 February 2013 at 2:51 pm

                Maybe you shouldn’t say such stupid things. People would pay more attention if you didn’t come up with such delusional crap while callings other stupid because they don’t share in your insane imaginings.

                Just sayin’

                • bad12 …
                  17 February 2013 at 3:01 pm

                  So printing money is only stupid if this country does it, is that what your saying,

                  I have yet to see you lambasting the US,Japan, and the British who all have in the last 5 years indulged their economies via the use of money printing, just to name a few…

                  • TheContrarian …
                    17 February 2013 at 3:04 pm

                    No. What I am saying is Draco is a fucking idiot.

                    In fact, no, he isn’t stupid. He’s just fucking stupid…if ya know what I mean.

                    • McFlock …
                      17 February 2013 at 3:15 pm

                      funny.
                      You always strike me as being more dense than dtb. Beneath the oozing secretions of conceit and arrogance that plaster your comments, of course.

                    • Colonial Viper …
                      17 February 2013 at 3:16 pm

                      There’s no essential difference between the private banks providing the money supply and the government providing the money supply.

                    • TheContrarian …
                      17 February 2013 at 3:26 pm

                      It isn’t hard to be conceited and arrogant when faced with naked idiocy.

                    • bad12 …
                      17 February 2013 at 4:09 pm

                      Oh so you have no intention of debating the ‘subtance’ of what Draco says vis a vis printing money,

                      You just feel it is relevant on this Sunday afternoon to indulge in a spot of abuse of the commenter,

                      Lucky you i don’t get to punish people for such ignorant use of this site, others have that small pleasure,

                      If i did tho, your above comments would have resulted in you receiving a severe spanking…

                    • TheContrarian …
                      17 February 2013 at 4:37 pm

                      Hugs and kisses.

                    • bad12 …
                      17 February 2013 at 4:40 pm

                      Tick, tock, your clock just reached 2 minutes to midnight…

                    • TheContrarian …
                      17 February 2013 at 5:18 pm

                      I’ve seen Iron Maiden play ‘Two midnights to Midnight” live twice now.

                      They kick ass in concert

                    • fenderviper …
                      17 February 2013 at 5:27 pm

                      They should have removed you from the crowd and kicked your ass.

                    • TheContrarian …
                      17 February 2013 at 6:16 pm

                      I had a foot of San Pedro cactus in my bag and whacked the guy in front of me in the head with it. He turned around and went “MAIDEN!!!” while giving me the goat salute.

                    • fenderviper …
                      17 February 2013 at 6:34 pm

                      Too bad when you drank the juice from that cactus it permanently rendered you a fucking idiot.

                    • TheContrarian …
                      17 February 2013 at 6:41 pm

                      Not permanently – it wore off after a few hours. But I missed my flight and created a scene at the airport.

                    • fenderviper …
                      17 February 2013 at 7:07 pm

                      “No. What I am saying is Draco is a fucking idiot.

                      In fact, no, he isn’t stupid. He’s just fucking stupid…if ya know what I mean”

                      It DIDN’T wear off, nor the desire to create a scene.

                    • TheContrarian …
                      17 February 2013 at 7:23 pm

                      Just trying to go about my day.

                      Here, lets give you hug. Poor wee lamb.

                    • fenderviper …
                      17 February 2013 at 7:45 pm

                      I’d not accept neither cactus juice or a hug from ewe.

                    • Draco T Bastard …
                      17 February 2013 at 7:53 pm

                      Oh so you have no intention of debating the ‘subtance’ of what Draco says vis a vis printing money,

                      Of course he doesn’t – because he can’t.

                    • TheContrarian …
                      17 February 2013 at 8:22 pm

                      Hey Draco – tell me again about how Sudan can produce everything it needs and Labour is a right wing party.

                    • Draco T Bastard …
                      18 February 2013 at 10:33 am

                      We’re waiting for you to dispute, with logic and facts, what I’ve said.

      • georgecom 6.2.2
        17 February 2013 at 9:31 pm

        One important aspects of a liveable UBI is that it can break the link between income and the market. At present access to an income is dependant on being available to work, being in the labour market and exploitable by capital.

        The exception is if you are genuinely unable to work temporarily or permanently. If unavailable temporarily, considerable effort will be made to get you to the point where you are market ready. Coercion can form part of this effort. If permanently unavailable for the work your income is set at breadline levels and additional income severley taxed. You are either presenting yourself at the job market or you are encouraged, cajoled, coerced (punished) to be so.

        A UBI sets up a greater range of options and flexibilities for people. They do not need to present themselves on the job market in order to exist, or if they do go to the market, can do so more on their terms. The states role as the ‘workforce ready’ employment agency for capital is weakened. Paula Bennetts ‘workforce ready’ bureaucracies could be severly downsized.

        Some may try and argue that a UBI removes incentives to work. It won’t actually however. Incentives will still be present. How strong the icnentive is will depend on what level a UBI is set. A UBI of $2000 per person per week may leave little incentive to work given the lifestyle that can be had on that income. A level of $300 per person per week would leave much scope for people to desire extra income and the work necessary to access it.

        The UBI would also be fair to all. I cannot complain about my neighbour being a bludger and living off an income whilst I go out to work. We both receive the same income from the state. If I want or need more I can work to gain it. If my neighbour wants the minimum income they will devote their time to things they want to.

        The level of a UBI would need to include the countries ability to afford, the level to maintain a minimum standard of living and the level necessary to leave open incentive. Perhaps an amount of $300 per person per week tax free might be the starting point. A couple gets $600 per week. The age where people receive it another matter. It may be accorded to children at birth, it may have an entitlement threshold at an age where school finishes for example. A compromise between the two might be to have stepped entitlements at various ages to acknowledge the costs of raising children such as $100 p/w before 5, $150 up to the age of 12, $200 from 12 until full entitlement age.

  7. Draco T Bastard 7
    16 February 2013 at 11:28 am

    A well-designed tax system would encourage self-reliance…

    A well designed tax system would start from the reality that we’re all dependent upon each other.

    Nonetheless when the right talk about ‘welfare dependency’ they have a point; the current tax system certainly creates poverty traps that those with minimal motivation are unlikely to try very hard to leap over.

    Is it minimal motivation or the fact that there’s no way out for those people? They have no resources to hand, no chance of getting any and they’re also lacking the basic knowledge needed as well and, with needed training costing so much, no chance of getting that either. And, yes, I’m well aware that there are other factors as well.

    On all five of these underlying principles our current tax and redistributive system is completely broken.

    The only real solution we have is to design a new tax system from the ground up and that means dropping all previous precedent as well. The tinkering that we’ve had over the last century or so is what’s caused the mess that we have.

    • Colonial Viper 7.1
      16 February 2013 at 11:39 am

      Is it minimal motivation or the fact that there’s no way out for those people? They have no resources to hand, no chance of getting any and they’re also lacking the basic knowledge needed as well and, with needed training costing so much, no chance of getting that either.

      RL and I had a brief exchange yesterday on letting people band together and capitalise their UBI in order to organise communal housing, collective enterprises, group transport and amenities etc.

      Italy lets their unemployed do something similar in small collectives, with their Marcora law.

      • Draco T Bastard 7.1.1
        16 February 2013 at 12:24 pm

        One of the reasons why I set the UBI to a higher rate is that people then wouldn’t need to capitalise it – they’d already have the resources available. Throw in the Learning Centres that I suggested and people of like mind could easily come together to pool those resources to start a cooperative. If the cooperative becomes successful and they need extra money to expand then an interest free loan would be available from the government, a loan that would be paid back by the taxes that the successful business pays rather than through a defined repayment schedule. This achieves a number of critical points:

        1.) People will be free to innovate
        2.) The financial capital will be available to support the cooperative
        3.) Makes the accumulation of money worthless

    • RedLogix 7.2
      16 February 2013 at 3:33 pm

      A well designed tax system would start from the reality that we’re all dependent upon each other.

      Well it’s both. Yes we are all dependent on each other and that is what the redistributive function of a tax system recognises.

      But equally it only works if we are all as self-reliant (or responsible) to the extent we can be. Obviously the UBI concept would be broken if everybody chose to just live on it alone and no-one undertook any essential or productive work.

      • Draco T Bastard 7.2.1
        16 February 2013 at 4:02 pm

        The question is: Responsible to whom? If it’s only responsibility to yourself, as the right seem to think, then society collapses. It must be responsibility to the community first and foremost.

        Obviously the UBI concept would be broken if everybody chose to just live on it alone and no-one undertook any essential or productive work.

        Yep, which is why I want everyone to know just what resources we have available and what needs to be done. Get that out there and I’m sure we’ll actually get what we need rather than the driving force of profit that’s destroying our world.

  8. Colonial Weka 8
    16 February 2013 at 11:41 am

    Thanks for opening up this discussion RL. The post is a good outline of what is wrong and what needs to change. I think we also need to have outlines of potential solutions and how they would work in NZ.

    eg Bill mentions above about the UBI being a livable income, but yesterday the ideas on what the UBI would be ranged from the current rate of the dole to up to $35,000 pa. If the UBI is set at the rate of the dole, then it’s not a livable income. These things need to be fleshed out and made overt in order to have useful discussion about them.

    I’d like to see what would happen to menial labour under a UBI system, but until we know what the UBI system might be, we can’t meaningfully discuss that.

    • Draco T Bastard 8.1
      16 February 2013 at 12:36 pm

      …but yesterday the ideas on what the UBI would be ranged from the current rate of the dole to up to $35,000 pa.

      Nobody suggested $35k/annum. The most suggested was by me at $20k. The US$35k was the approximate amount available for every man/woman and child in NZ.

      I’d like to see what would happen to menial labour under a UBI system, but until we know what the UBI system might be, we can’t meaningfully discuss that.

      Yes we can it’s just that, without having a defined system, it would be a rather broad discussion.

      With my own system I think you’d find that a lot of menial labour would disappear and that what’s left would be higher paid. But I think that the biggest improvement would be that arsehole bosses would quickly find themselves without a job as people would no longer be forced to work for them the way that the present system does.

      • Bill 8.1.1
        16 February 2013 at 1:34 pm

        Necessary but tedious or menial work could be incorporated into ‘job complexes’ rather than beng assigned to one person. And there’s no reason why wages could not then be in the form of a social wage that varied – increased – in line with how much undesirable work you took on.

        • Colonial Viper 8.1.1.1
          16 February 2013 at 1:36 pm

          Necessary but tedious or menial work could be incorporated into ‘job complexes’ rather than beng assigned to one person.

          And the teams assigned to work these “job complexes” can be taught to be self managing and self organising. Eliminating the need for a supervisory or managerial class.

          • Bill 8.1.1.1.1
            16 February 2013 at 2:34 pm

            … can be taught to be self managing and self organising. Eliminating the need for a supervisory or managerial class.

            Indeed. Well, almost. I’m just thinking people can’t be taught to be self managing. Rather, we have to learn, otherwise we’ve just created a new vertical division of labour.

  9. tracey 9
    16 February 2013 at 2:15 pm

    redlogix 914 am

    in my experience they hate it on others and use their mythological belief in bludgers to justify or rationalise their own rorts

  10. Rogue Trooper 10
    16 February 2013 at 2:43 pm

    What an Excellent post (foundational” The Big Kahuna”,and The Big Lebowski, along with “Growth Fetish”)

  11. Ad 11
    16 February 2013 at 3:48 pm

    Red, really appreciate the post.
    Very thoughtful and challenging.
    I hand’t properly engaged with Morgan’s ideas before and this was a helpful bite-size.
    Tax is not my field of expertise so I won’t presume to engage other than to read properly and think.
    Seriously hope Parker and Norman are neck deep into it.

    • RedLogix 11.1
      16 February 2013 at 6:04 pm

      The main thing to take away from here is not to fall for the “There is No Alternative” orthodoxy. From now on when you read or listen to any discussion around tax or redistribution, come back to the UBI concept and see how it fits.

      In most cases I’d suggest that it would be a better solution than the one the media, business or political class is offering you. There is an alternative and it works because fundamentally it treats all people exactly the same.

    • Matthew Whitehead 11.2
      17 February 2013 at 10:00 am

      The Greens have proposed a UBI before, so I imagine they’re still well-disposed to the idea.

  12. bad12 12
    16 February 2013 at 5:41 pm

    Ok the big Kahuna treats us all the same at the point of starting with a universal allowance, lets put this at $15,000 a year just for arguments sake, there’s a level playing field there but how does this alter the realities of both employment and accommodation,

    The level playing field of providing everyone with that initial $15,000 is soon destroyed when we look at how employees are paid, and how the accommodation market charges rent,

    If both accommodation costs and pay rates were not also equal across the whole of society then the only real benefit of having the universal nature of the universal benefit is that such would highly decrease the chances for politicians to denigrate beneficiaries,

    I cannot though see how a universal $15,000 would lead us to a more equal society then we have now if both accommodation costs and wage rates were not to also be equalized,

    The next problem of course is the division of labour, how do we ensure that an equal opportunity of work is made available to all…

  13. Colonial Viper 13
    16 February 2013 at 5:49 pm

    Yep. The UBI is only one piece of the puzzle, but an important one.

  14. Matt Nolan 14
    22 February 2013 at 10:31 am

    “Tax and welfare are the two most invasive and potent of all things our governments undertake; it’s time to start creating a coherent political narrative the people of this country can understand and believe in.”

    Very true. Transparency around the welfare system is a prerequiste for a well functioning democracy – irrespective of ideology.