richard parncutt, uni graz bien congress, ottobrunn/munich, 14 september 2012
DESCRIPTION
Universal Basic Income and Flat Income Tax (UBI-FIT) Tax justice, work incentive, economic democracy. Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012. The context: Socialism vs capitalism. General features of group conflict - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/1.jpg)
Universal Basic Income and Flat Income Tax (UBI-FIT)
Tax justice, work incentive, economic democracy
Richard Parncutt, Uni GrazBIEN Congress, Ottobrunn/Munich, 14 September 2012
![Page 2: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/2.jpg)
The context: Socialism vs capitalismGeneral features of group conflict
– strong identities based on difference– ignorance of Other group prejudice, moral arrogance– unfair (one side is stronger)
General principles of conflict resolution– mutual recognition– fairness, transparency– contact and knowledge
• UBI-FIT approachIntegrate principles from both sides:– socialist: reduce wealth gap– capitalist: increase incentive
![Page 3: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/3.jpg)
Cunning Strategy #1Avoid controversial ideologies
Not:What would you do if you didn’t have to work? anti-socialist knee-jerk
…but instead:Let’s simplify tax-welfare system!Make more efficient, transparent, democratic. Both left and right wing are interested
![Page 4: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/4.jpg)
Cunning Strategy #2Focus on universally agreed ideas
Two basic principles:•Unemployed need enough to survive.•The more you work, the more you get.
Who can disagree with that?UBI-FIT simply realises these two principles.
![Page 5: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/5.jpg)
Cunning Strategy #3 Focus on GINIR
Gross-Income-Net-Income-Relationship
- not the individual UBI rate or FIT rate
![Page 6: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/6.jpg)
My bias• Centre-left liberal-green• Belief in
– regulated free enterprise– eliminating poverty– left-right cooperation– transparency democracy
Dreamed up UBI-FIT in Australia in 1987New to the current scene Sorry for re-inventing the wheel
![Page 7: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/7.jpg)
Problem #1Poverty
• One billion people are affected• High rate even in rich countries
• Rising wealth gap • Over 1000 US$-billionaires
UBI would (almost) end poverty
![Page 8: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/8.jpg)
Problem #2Welfare traps
Die Zuverdienstgrenze als Sozialhilfefalle
As income passes the welfare cut-off… – welfare is suddenly or gradually cut– equivalent to a tax bracket of 100% or more!
Suppress incentive Reinforce class differences and conflict
UBI-FIT would eliminate welfare traps
![Page 9: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/9.jpg)
Problem #3The cost of illegal activities
1. The poorWelfare fraud costs millions
2. Middle classTax avoidance costs billions
3. The rich Global financial games cost trillions
UBI-FIT stops #1 & tackles #2Global transaction & wealth taxes tackle #3
![Page 10: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/10.jpg)
Problem #4The cost of inefficiency
The cost of tax-welfare complexity:•Armies of accountants and bureaucrats•General public does not understand•Democracy does not work
The system is not inherently complex!•Origin of complexity: Politicians wooing voters
UBI-FIT reduces waste, increases transparency
![Page 11: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/11.jpg)
Definitions
• Gross income does not include UBI• Net income is disposable income• UBI must be both universal and
unconditional (as Van Parijs explained)
![Page 12: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/12.jpg)
Progressive income tax in Austria2005-2009
Broken line: Extrapolated high rate BI = 8.5 k€/yr = 708 €/mo
Gross income (k€ /yr)
Net
inco
me
(k€/
yr)
![Page 13: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/13.jpg)
Progressive income tax in Australia1 € ≈ 1.7 $
Gross income (k$/yr)
Net
inco
me
(k$/
yr)
23
0%15%
30%
40%
45%
Broken line: Extrapolated high rate BI = 23k$/yr = 13.1 k€/yr = 1090 €/mo
![Page 14: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/14.jpg)
Progressive income tax in Canadafederal not provincial; 1 € ≈ 1.6 $
Gross income (k$/yr)
Net
inco
me
(k$/
yr)
11.4
Parameter: marginal tax ratesBroken line: Extrapolated high rate 11.4k$/yr = 7.28 k€/yr = 607 €/mo
![Page 15: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/15.jpg)
Unconditional Basic Income UBI
Advantages•Eliminates poverty•Reduces bureacratic interference•Wages more accurately reflect value
Disadvantages•May encourage long-term unemployment•Long-term unemployed are vulnerable
![Page 16: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/16.jpg)
Flat income tax FIT
• Advantages– Payable immediately harder to evade/avoid– Perceived as fair by the rich politically stable
• Disadvantages (without UBI)– Increases wealth gap
• Disadvantages (with UBI)– ?
![Page 17: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/17.jpg)
Universal Basic Income + Flat Income Taxcf. Friedman & Rose (1980); Atkinson (1995); Strengmann-Kuhn (2005)
0
1000
2000
0 1000 2000 3000
gross income (€/mo.)
net i
ncom
e (€
/mo.
)
Arbitrary parameters: BI = 500 €/mo., FT = 50%Could be: BI = 700 €/mo, FT = 40%
Main thing is the gross-net relationship, not the individual parameters!
basic income
break-even point
![Page 18: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/18.jpg)
Setting the parameters
• Basic income (500…800 €/mo)– high enough to eliminate poverty
• poverty line in Austria: 60% median wage ≈ €900– low enough to maintain incentive
• Tax rate (35…50%)– high enough to finance BI and the rest– low enough to maintain incentive
• Adjustment procedure– balance budget (zero deficit)– left-right negotiation
![Page 19: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/19.jpg)
Progressive taxationUrgently need to reduce the wealth gap
• Flow– Consumption: Luxuries only! – Income: Flat (40%?) with UBI– Capital gains: Treat like income (gifts,
inheritance, interest, speculation…)– Transactions: To reduce speculation
• Stock– Households: none– Private wealth: flat (1%?), threshold ($1m?)– Companies, trusts: flat (1%?), no threshold
• Environment– Rich have bigger environmental footprint
![Page 20: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/20.jpg)
Flat wealth taxesabove a threshold e.g. $1m
...are effectively progressive because only the rich have significant wealth
(middle classes have moderate income but low capital)
Example: 1% / year
Capital (€) Tax (€/yr)1 000 10
1 000 000 10 000
1 000 000 000 10 000 000
![Page 21: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/21.jpg)
Consumption taxes are regressivee.g. VAT, Mehrwertsteuer
Poor pay a higher & of income in tax VAT contributes to growing wealth gap
VAT only on (genuine) luxuries!•replace VAT by wealth tax•UBI could be financed by wealth tax
(or by combination of different taxes: wealth, VAT, income, environment, transaction)
![Page 22: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/22.jpg)
UBI-FIT is effectively progressiveExample: BI = 500 (€/mo) and FT = 50%
Gross income (K€/mo)
Net income (K€/mo)
Effective tax rate
0 0.5 - ∞1 1 02 1.5 25%3 2 33%4 2.5 37.5%5 3 40%
10 5.5 45%100 50.5 49.5%
![Page 23: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/23.jpg)
UBI-FIT:Progressive in only one way
• Allows for any level of progressivity or income equity• Progressivity can be directly adjusted transparency
Don‘t combine 2 progressive systems!• unnecessary complexity, reduced transparency• opportunities for clever tax advisers
![Page 24: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/24.jpg)
Approaching UBI-FIT
Incrementalism•Agree on long-term goal•Gradually adjust GINIR over a few years•Monitor effects of changes; adjust
![Page 25: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/25.jpg)
Universal Basic Income and Flat Income Tax (UBI-FIT)
Tax justice, work incentive, economic democracy
Richard Parncutt, Uni GrazBIEN Congress, Ottobrunn/Munich, 14 September 2012
![Page 26: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/26.jpg)
Global Wealth TaxNational governments are steeped in debt, a billion people live in poverty worldwide, and urgent warnings about climate change are being ignored. In all three cases, the main problem is money. But the money is available - in abundance. Economic globalisation is making the rich megarich. Worldwide, there are now over a thousand US$-billionaires. As concerned citizens across the world, we call on relevant global organisations such as the UN, IMF, World Bank, and G20 to negotiate a global agreement to tax all wealth - including all companies, trusts, and wealthy individuals - at a single rate of about 1% per year, in addition to existing non-wealth taxes. Exceptions should be limited to genuine non-profit organisations and individuals whose assets are less than about US$ 1 million.
![Page 27: Richard Parncutt, Uni Graz BIEN Congress, Ottobrunn/Munich, 14 September 2012](https://reader036.vdocument.in/reader036/viewer/2022070420/56815f88550346895dce8d62/html5/thumbnails/27.jpg)
Global Wealth Tax
Please…•Find the petition at change.org•Sign it•Forward the address!