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OPINION: We have more than a week before the Government faces its greatest opportunity to meet its transformative (self-imposed) billing, in this year’s Budget.
Covid-19 has left the economy in tatters. The government has a blank slate and an open checkbook to show how brave he is.
I have said before that I would like to see a Universal Basic Income (UBI) as part of the stimulus package and as such we have just released TOP’s Official UBI Policy. Given the state of the economy, some form of universal stimulus is urgently needed.
Our proposal is a UBI of $ 250 per week for people from 18 to 65 years old. A modest UBI child is also possible (around $ 40 per week) and those over 65 already have their UBI (NZ Super). This would be financed mainly with a 33 percent flat tax.
READ MORE:
* Coronavirus: how a UBI can help New Zealand
* Why is now not the right time for a universal basic income?
* Coronavirus: the Minister of Finance considers that the universal basic income avoids the economic danger
Under the UBI and the flat tax, everyone is better. Most of the profit goes to the working class: those very workers that society has just realized are so essential. Our minimum wage workers would be around $ 6,000 a year better, finally putting them well above the living wage.
Even those who make more than $ 70,000 a year would also have more money in their pocket.
For low-income families, the UBI would mean children’s lunches, school shoes, dental work instead of toothache, and paying bills. That would make a big difference for many people and hopefully reduce our alarming mental health statistics. UBI also honors the unpaid work of parents, caregivers, and volunteers who stay home. It fosters training, entrepreneurship and business creation. The UBI has the power to dismantle the poverty trap.
Under a UBI, people who benefit from Working for Families would receive a strong incentive to find employment. Recipients can volunteer or pick up part-time work without losing their secure income. As a result of the flat tax, they would also face a tax rate of 33 percent, compared to the current 60 percent or more. Most of the benefits would be replaced by the UBI, although some would require a small recharge to ensure people were not worse off.
Things Geoff Simmons: “This proposal would significantly simplify our tax and benefits system.”
While a 33 percent flat tax is not enough to cover the entire long-term cost of a UBI, there are many additional savings that this approach can bring.
This proposal would significantly simplify our tax and benefits system. There would be no need for a job search grant or student grants and tax returns would be much simpler. Under UBI, much less bureaucracy is needed, leading to less time wasted on paperwork.
The benefits are broader and deeper than this. From experiments carried out abroad, we know that a
UBI has many benefits of continuous flow. It improves mental health, reducing addiction and crime. People are more likely to train and have better jobs, leading to higher long-term tax revenues.
American presidential candidate Andrew Yang added all of these benefits and acknowledges that they would contribute up to $ 10 billion per year in a New Zealand context. That would be more than enough to make up for the remaining fiscal deficit in this policy.
However, TOP does not believe in leaving things to chance. We spent many months researching this policy, which included a very conservative cost without taking on any of the benefits that Yang predicted. Depending on whether those benefits appear, we have a Plan B.
As the economy recovers, an asset tax could be applied to compensate for any shortfalls in income. This tax would ensure that all assets pay at least as much tax as a bank deposit. In other words, if you have money in the bank that earns 3 percent and pays a 33 percent tax, it’s about a 1 percent tax on the value of that asset, every year.
The tax only applies to the assets of an asset: the debt is subtracted. If the asset is already paying a taxable return of at least that amount, there is nothing more to pay.
No one likes to pay more taxes, but the vast majority of kiwis would be better off. Remember that about 20 percent of kiwis own 60 percent of the assets, so they will pay most of the tax. About 40 percent of us own nothing.
This would ensure that wealthier New Zealanders, many of whom pay less in taxes than a teacher or nurse, pay their fair share of taxes. It would also drive speculators away from putting more money into our real estate market and encourage them to invest in companies that create jobs.
In general, the UBI would offer a tax and welfare system that is modern, simple and fair.
Geoff Simmons is an economist and leader of The Opportunities Party.
