Wednesday, December 02, 2009

The Tax Working Group and a UBI

I haven't paid much attention to the findings of the Tax Working Group because unlike the right, I am not obsessed with tax. Furthermore, I don't see how getting together a bunch of wealthy people together in a room is likely to come up with anything other than the usual pleas that they should be given a tax cut which everyone else should pay for. It doesn't help that the media framing in this (helped in no small part by wealthy political journalists who want tax cuts of their own) is all about the "need" to cut the top tax rate and lower business taxes (creating further opportunities for the wealthy to engage in evasion), when if we want to reduce inequality - and hence pretty much every other poor social indicator - we should be doing exactly the opposite.

But in amongst the expected special pleading from the greedy (cut taxes and raise GST - i.e. give to the rich and rob from the poor), there was one interesting idea: Gareth Morgan wants to introduce a Universal Basic Income, paid for by taxes on land and capital. I've expressed my support for a UBI before - by giving everyone a guaranteed standard of living regardless, they enhance human freedom and allow us to pursue our lives with some insulation from the vagaries of disease, bad luck, and the market. And as Marty G at The Standard points out, taxing land and capital is inherently progressive (in that it directly taxes unequally-distributed wealth), but even so there is one flaw in Morgan's plan: it uses a flat tax rate. This is obviously appealing to the rich, and makes the maths a lot easier, but as someone on the left, I don't see why a UBI means giving up on the idea of progressive income tax. We can have our cake and eat it too.

I doubt the government will implement Morgan's idea; instead they'll just cherry-pick some of the more regressive options in another effort to use the power of the state to transfer wealth into the pockets of their rich mates. But what this shows us is that a UBI is affordable; if we want to go down that path, we can. The only question is whether we want to.