UBI: an overarching view
Are we ready for a living wage universal basic income? [‘No’ is the wrong answer.]
Were Australia to abolish all taxation, and everyone over 15 years of age to receive a universal basic income of say $40,000 pa, this would amount to about $800 billion pa, or 50% of our GDP.
The chart shows ‘economic rent’ to be currently running at 50% of GDP (including taxation, in terms of John Locke and Mason Gaffney’s ‘ATCOR’ and ‘EBCOR’*), and very little of this has been properly and efficiently captured. It’s a mess.
The tax regime actively fosters privatisation of publicly-generated economic rents, so the public does what it is encouraged to do, namely, invest/speculate in inflating land prices. As a result, taxation and its associated deadweight losses have caused productivity to wane since 1974. Related increasing poverty has come to undermine Australia’s social fabric, but our media have been deaf to it all those years.
If families and businesses were to pay the rental value for the land over which they hold title, instead of existing taxes, gradually increasing to the full rental value of sites–which would reduce land prices to zero–counterproductive taxes could be abolished accordingly.
Decreasing land prices (as opposed to land rental value, which is likely to increase in this scenario) protects the currency from inflation’s fundamental driver, land price inflation (land having no cost of production) and acts to reduce deathly levels of private debt, because land price constitutes by far the greater part of bank mortgages.
It would be the role of government also to tax away other unearned income, such as electromagnetic spectrum rents, and to consider whether to apply ‘sin’ taxes on polluters, smokers, &c.
Benefits of the UBI/land rent proposal?
- A UBI does not pay Australians to do nothing: they’d have the comfort of a living wage to employ themselves to do anything.
- Australian businesses would have a secure home ‘market’, in an increasingly threatening world economic environment. Moreover, their wage costs would actually reduce, because they need only offer amounts additional to the UBI to attract workers.
- The current deadweight losses from taxing productivity* (estimated to be twice the amount of taxation levied) would vanish–as land rent inserts no deadweight losses into the economy–as would the economic recessions resulting from burstings of recurrent land prices bubbles.
Yes indeed, a UBI, and taxing unearned economic rent away, is quite a change from the status quo, but the coronavirus threat period presents an hiatus, a positive opportunity for Australians need to consider genuine reform.
Together with NZ, Australia once led the world in political reform. With a little bit of spine, we could do it again.