Monday, February 13, 2017

A Citizen's Income for all would fairly address immigration too

The Occupy movement of 2011: ''we are the 99%'', fingered the top 1% in terms of income and wealth (25%/40%). Economist Joseph Stiglitz had published a paper in May saying these 1% are typical of the wealthy though history who whilst taking to themselves the best of education, doctors, houses and lifestyles, do not realise until too late that their fate is tied up with how the other 99% live.

Slow forward to 2017. Are lessons being learnt? Not if the Prospect magazine February 2017 article 'Voting out' by Tom Clark is a guide. Clark reviews a couple of books Against Elections (David Van Reybrouck) and Against Democracy (Jason Brennan). Apparently in the future we may need to be either a liberal or a democrat: 'The educated bourgeoise will put its own liberty ahead of other people votes'. Already in the US it seems that these trends have form, witness the deliberate disenfranchisement of black voters taking place. In late 2016 a court struck down laws having  'discriminatory intent'. Onerous regulations around voting can prevent or dissuade electors to enter their vote. Beware. Clark quotes a Daily Telegraph article by Ian Cowie who in 2011 proposed limiting the vote to those who pay tax. The recent Brexit and Trump votes may bring more such ideas aimed at those who didn't get the vote 'right'. The time is ripe for the issue of 'citizenisation' to be taken seriously - a central issue of the book The Free Lunch - Fairness with Freedom.

If the powerful really are so concerned about loss of their economic status quo that they will resist popular moves to level the playing field a little, what should we do? Justin Welby Archbishop of Canterbury  in The Times (11 Feb) when launching his book Dethroning Mammon, says that the trickle down effect of letting the rich make wealth in the hope that some gets to poor, has been shown not to work and thus the rich should pay more tax. Fair enough as far as it goes but how do you get permanent poverty alleviation?

One part of the solution is a Basic Income for all   (also known as Citizen's Income or Citizen's Royalty). This involves a regular, non-means-tested payment for everyone. The New Statesman quotes a scheme for the UK having an age-graded payment from £56 to £142 per week to all, even children, (leaving in place housing benefit and disability allowance). This payment would be instead of child benefit, income support, jobseeker's allowance, national insurance and state pensions.  It would be nearly revenue and cost neutral and would massivley cut bureaucracy. Most importantly it would remove the current disincentive to work for those on benefits currently who face swingeing losses through tax should they get a job. An additional benefit from this, with immigration being a worldwide issue, the payment of a basic income to all citizens - having a valid national identity - should allay fears of  'welfare immigration' at least.

However, whilst this is the obvious and simple solution to poverty, an adverse effect would be that in giving cash to all, some of those who receive it as an addition to an already sufficient income may use it in the housing market. A basic income for many such will enable them to do a property upgrade and thus fuel house price rises. Law of unintended consequences: those people who now rent and are just below the property buying level will find their hope of having their own roof over their heads rather than a rented one, pulled away from them.  And the irony would be this was caused by a measure that set out to help the poorest who are overwhelmingly renters of their homes!  We are increasingly a divided nation of home owners and home renters.    

The answer to this to levy land value tax on all freeholds. This would cover the land value of the plot and not the building value - a tax on say 30% of the 'house price' seen on property websites. There could be a basic tax free 'homestead allowance' allowance before tax is due to cover houses below the average value. The next step is to set the land value tax liability against any income tax paid so that the net, after-tax, income of most individuals and households would be unaffected. For property rich / income poor people the payment could be deferred until eventual property sale. Inheritance tax might be reformed at the same time. It should be possible for the general mass of taxpayers to be relatively unaffected. Taxing land would also bring land forward for building homes which would solve another problem.

As the Archbishop says the richest should indeed cover the bulk of the cost. A problem in making a real difference to poverty and maintaining freedom for all is, of course, human selfishness. If I am to be stung with just a little extra tax because I am fortunate enough to own a freehold property, should I vote for that as one of the 99%? Archbishop - what would you advise?

For a discussion of basic income, land value tax, and general issues of citizenisation, see The Free Lunch - Fairness and  Freedom.  A basic income is currently being tested in Finland.

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