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Proposals for Discussion

There are many different proposals for how to run a Basic Income policy and other welfare policies. UBIPA wishes to gather different proposals together for comment and ultimately choosing which members recommend to the public.

1. Environmental Taxes and a UBI                                                                                                                                                 (posted 20/02/2021)


UBIPA hereby puts forward one proposal for a partial Universal Basic Income (UBI) attached to an Environmental Tax. This could prove a popular way forward since over 50% of the population now support a UBI and over 70% of the population now support serious action on climate change.

While other forms of environmental tax could be included, the essence would be tax on CO2 emissions, starting at $40/ton, with all revenues being distributed back to the population as a small UBI, distributed on a per person basis as opposed to per household. This would negate the regressive nature of a carbon tax as some 70% of the population could be better off.

This would more than pay for a Livable Income Guarantee, as proposed by John Quiggin et al. Alternatively, if applied as a UBI style payment, this would create only a small payment per person, which could be provided tax-free universally to everyone. However, we need more drastic climate action than this and hence we could increase the carbon rate by $20 each year. With every increase, the UBI style payment would also increase, ensuring that that the public is compensated.

Using simple rounded figures, Australia emits over 500 million tonnes of CO2 per year. Using a carbon tax of $40/ton, this leads to a revenue of $20 billion. Given an adult population of about 20 million, this leads to about $1000pa per person, around $40 per fortnight.

The current fuel tax is 42.7c per litre (excluding heavy vehicles). This equates to a carbon tax of around $170/tonne. With a carbon tax of $170, a UBI, for adults only, of around $212 per fortnight could be paid. We could start with $40/tonne in 2011-12 rising $20 a year to $200/tonne in 2030 and a UBI of $250/fortnight. 

Hopefully, given such action, Australia would be welcome back into international negotiations on what rate is required. Calculating more precise figures than given here may not prove very useful as what happens will all depend, on population growth, economic growth given covid and developments in technology, but the principal effect is clear.

Two key questions arise. Firstly, the tax is meant to dissuade the emission of CO2. If it is successful as hoped, the revenues would decline over time and the UBI would have to be reduced or paid from other sources. Secondly, do current fuel taxes remain or are they reduced so as not to duplicate the tax collected as a carbon tax. Eventually, when carbon taxes rise to $170/kg, then fuel taxes could possibly be removed. It could however possibly be argued that fuel tax is a tax on pollution. Also it can be seen as a user-pays tax to pay for the roads. Hence fuel tax should possibly remain.

As the carbon tax works through the economy and is incorporated into prices, the value of this extra basic income will be reduced. It would be interesting to see research on the average carbon emissions in the consumption bundles at different income levels. While such a UBI would not be something for nothing, it would create pressure for people to consume products embodying less carbon emissions, and thus hopefully alleviate climate change.

Comments or any corrections would be very welcome.

2. Matching the Tax-free Threshold to a UBI

If we had a taxable UBI of $25,000pa to replace Unemployment benefits, the age pension and disability support, and had a tax threshold of $25,000, this would remove all the very high effective marginal tax rates which are a disincentive to work. 

3. Storing all Royalites in a People's Wealth Fund

An Australian People’s Wealth Fund should be created to collect all mining royalties. Mining royalties have risen dramatically over the last 15 years up to $14bn in 2018-19. These belong to all the people of Australia. They should not be frittered away by gifting tax cuts to the wealthy as Thatcher did but used to create a national wealth fund as in Norway. The collection of royalties is currently a hotchpotch of bits here and there in state and federal taxes. This needs streamlining into a well-organised structure directing payments into a fund for the people of Australia.

4. Garnaut's Proposal for a UBI

Summary of Garnaut’s 'UBI'
a. Untaxable $15,000pa ($575 per fortnight) paid to people earning less than $250,000. The payment is unconditional without any requirement to seek work. Jobseeker abolished. To rise with inflation.
b. Zero income tax threshold with 37% tax rate up to $180,000, 45% above.
c. People on the age pension, disability support or family allowance still need to apply for income support from Centrelink, for supplements to raise their support to current levels.
d. Removes supplicant nature of the unemployed without dependents but nobody else.
e. Excludes residents who are not citizens. Centrelink does not do this.
f. People excluded if own over $2 million of assets (superannuation, house, and other assets minus debt).
g. Would appear that there is no deduction for unemployed couples, but the deduction could well remain in Centrelink’s derivation of the appropriate value of supplements.
h. Must live in Australia at least 6 months to receive the UBI plus pro-rata deductions if spend more than three months abroad. Australians living abroad are excluded, They could possibly receive the support received today as a large supplement but might well lose all support.
i. Estimates cost to be about $40 billion but no clear calculations provided.
Please add any details/corrections you think worth adding.