UBI vs MFTC

Jim Rose looks at Gareth Morgan’s advocacy of a universal basic income, as opposed to our current minimum family tax credit. What does he find:

If you do a UBI which is fiscally neutral, the big losers are:

• Sole parents lose $150 a week
• Retired couple lose $50 a week

So when people argue for a UBI, they are arguing for less money for sole parents and superannuitants. The big winner would be:

• Sole earner on $200,000 makes $150 a week more

What if you did a UBI, so sole parents don’t lose out?

You’d be spending an extra $10 billion a year!!!

Rose notes:

The Treasury modelled a Guaranteed Minimum income at the request of the Welfare Working Group in 2010. A  guaranteed minimum income  of $300 per week – the mean benefit income among those on benefits – would cost $44.5 billion or $52.6 billion if we extended it to super annuitants as a replacement for NZ Superannuation or old age pension. The former could be covered by a flat personal income tax rate of 45.4%; the latter, 48.6%. Full fiscal neutrality would require tax rates of 50.6% and 54.4%.

Wonderful!

He quotes Brian Easton who said:

Many advocates put the UMI forward without doing the sums. Those who do, find that the required tax rates are horrendous or the minimum income is so low that it is not a viable means of eliminating poverty.

UMI is one of those things that are great in theory, but crap in practice.