Polity by Rob Salmond

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Polity: Eleventy billion dollars!

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  • Ian Dalziel, in reply to Rich Lock,

    Your ‘Rise of the Machines’ nightmare app needs a critical update. Get with the 21st Century, Grandad!

    I fixed your bad link, you 21st century whippersnapper, you!
    ;- )

    Christchurch • Since Dec 2006 • 7944 posts Report Reply

  • Matthew Hooton, in reply to Ian Dalziel,

    I mean "universal" within a geographic area. A payment made to, say, only the 25-65 age bracket, that is not enough to live on, and is part of a system that then provides for higher benefits for people who are unemployed is not a UBI as most people understand it. It's a mere tax change.

    Auckland • Since Aug 2007 • 194 posts Report Reply

  • Keir Leslie, in reply to Matthew Hooton,

    Here's the bit from the discussion paper which frames up the "preferred option':

    An alternative proposal would be to retain New Zealand’s progressive income tax system and GST; abolish existing welfare transfers but allow for supplementary transfers for disadvantaged groups; and pay a UBI of $11,000 to all adults over the age of 18. For the government to afford a UBI at this rate, including to all those between the ages of 18 and 20, there may need to be some changes to taxation policy to mobilise revenue. The top tax rate could be increased or further revenue might be gathered from other forms of taxation. This proposal would better satisfy precepts of fairness, by retaining progressivity in tax and rejecting any lower youth UBI. It would ensure some continuity with the tax system under the status quo. But more costing would have to be done to finalise the details of the revenue required. As well, doubts would remain about the adequacy of an $11,000 UBI.

    So I think that sinks one of your assumptions - i.e there's no attempt to ensure no-losers via a universal payout, just via top up payments.

    Since Jul 2008 • 1452 posts Report Reply

  • Alfie, in reply to Matthew Hooton,

    Which are the countries such a controlled experiment is happening?

    I mentioned a few (with links) in the earlier thread. The Netherlands is conducting small scale trials, Finland is taking the issue seriously and will be trialling a system in 2017-18. Switzerland is due to have a referendum on UBI in June.

    Dunedin • Since May 2014 • 1436 posts Report Reply

  • Ian Dalziel,

    the fecal finger of fate…. or stool life portraits?
    Speaking of job losses to technology – I see a gap in the market for some crossover between Syft technologies and modern ‘high end’ Japanese toilets
    see: http://www.bbc.com/future/story/20160331-why-we-need-a-better-way-to-measure-farts
    Everyone could have a diagnostic toilet – there would be an app of course – but imagine the long term health savings…
    Our personal microbiome needs a voice too…

    Sorry for the diversion, as you were, back to the topic at hand…

    Christchurch • Since Dec 2006 • 7944 posts Report Reply

  • Matthew Hooton, in reply to Keir Leslie,

    At $11,000 gross with no lower youth payment, the gross cost is $11,000 x 3,543,600= $38,979,600,000 in the first year. But the savings are nothing remotely like $25,o0o,000,000. And, under such a policy, there is still the EMTR problem (in fact the income tax system would become more complicated), there would be no administrative savings (and probably some increase) and no change to the indignity issue. That is, for example, a single person aged 25 or over with no kids who becomes unemployed still has to go to WINZ to apply for the extra $25 a week to bring their income to what it would be now.

    In my view, such a policy would be worse than the status quo. But I don't see why David Farrar (or anyone else) was lying for talking about a c$40b gross cost and my range of $49b-86b for a policy that also provided extra assistance to people with children (and solved the policy problems a UBI is meant to address) was entirely legitimate. (The difference between my $49b and $86b depends on whether or not the policy replaces National Superannuation, which also affects the savings side.)

    I don't think Labour will be proceeding with this at election time because they either go for something like the $39 billion preferred option with relatively low savings from the existing $25 billion welfare state, or they go with something like my $86 billion with the full $25 billion savings, but either way the tax rates required to fund the difference is not going to politically sustainable.

    I also think the idea of doing a controlled experiment in two towns, as suggested here earlier, is absurd. The demographics of the two towns would have to be close to identical; the study would have to be longitudinal (and would people be able to move in or out of the towns through that study?); you would have to check you weren't just studying the effects of putting more taxpayer money into one town over the other; and you would have to control for shocks that occurred in one town but not the other (say, if a proper ETS was introduced and one town was a forestry town and the other a dairy town). I don't know that such an experiment is possible or what it would tell us.

    It seems to me that a proper UBI (universal and enough to live on at a basic level, and allowing the abolition of other forms of support, so dealing with the EMTR and other issues) is so obviously better than the status quo that no such experiment is necessary and you would proceed with it if you could get the maths to work in the sense of the tax rates required not creating some of the same problems as the current EMTR problem,

    It seems to me Labour hasn't thought any of this through properly, but other people have, for many years - and that Labour has just gone on gooey eyed at the leftie celebrity economist they brought out to their conference.

    Auckland • Since Aug 2007 • 194 posts Report Reply

  • Matthew Hooton, in reply to Alfie,

    None of those are controlled experiments and, as discussed in my response to Keir, I don't see why one would be needed anyway. A UBI is self evidently better than the status quo, if that maths can work, if it solves the EMTR issue.

    Auckland • Since Aug 2007 • 194 posts Report Reply

  • BenWilson,

    Attachment

    Rough outline of 2 scenarios, graphical. The second one is obviously the extreme case. The first one is what I understand the idea of the UBI to be. The devil is in the detail of how to get it to work like that.

    Also, note I only put Income on the y axis. A more honest version of what I would like to see in society (at least to start with) has that axis as Financial Wellbeing. Income is a very blunt measure of it, particularly at the low end. It's possible to have no income, but be perfectly well off (if you had, for example, a stack of gold bars in a bank that you spent when you felt like it). It's possible to have no income, but so many assets that you live like a king. It's also possible to have a high income, but still be effectively impoverished, if all your costs are so high that you're struggling to pay for basic things. People with large families can easily be in this situation.

    Auckland • Since Nov 2006 • 10653 posts Report Reply

  • BenWilson,

    I'll do this on a computer sometime soon. It is a little difficult to make it look good, though, because the actual shape of the income distribution is so hockey-stick like that the y-axis becomes grossly enlarged, and you can barely see the UBI. The top bracket being the 250k plus range, which has mean income 40 times the size of the proposed UBI which means it's hard to see the conceptual areas I'm drawing.

    Also, as I said above, income isn't all of the story.

    Auckland • Since Nov 2006 • 10653 posts Report Reply

  • BenWilson,

    Another shortcoming of my picture is that it is only on individuals. Companies aren't in there. Obviously I don't think companies should be getting the UBI. Quite the opposite, they should be doing a lot of the paying for it.

    Auckland • Since Nov 2006 • 10653 posts Report Reply

  • BenWilson, in reply to Rae Sott,

    It is clear, well to me it is, that there will be many, many fewer taxpayers on which to call to pay a UBI, so elsewhere will have to be looked for the source of it.

    It’s certainly a problem, and in the very long run, this will be the case. There are many possibilities. One of the most compelling I’ve seen is to look to the actual creation of money itself, taxing capital indirectly via inflation. It’s a model which counters uber-capitalism with hyper-socialism. But this is futuristic stuff. Until we even buy into the eradication of abject poverty, we’re stuck with money creation via debt, how we have it now. Which is no less inflationary, but far, far more punitive. The model for thousands of years has been for debt to spiral ever upwards until some crisis point where there is massive debt forgiveness all around, typically after some kind of revolution or war. We could break the spiral. If we had the vision to do it. We could spiral it downwards until there is only positive wealth, no moneylending, all capital is equally shared and the profits equally distributed. It could even be done slowly. Wouldn’t that be a nice, refreshing sign for our species.

    Or we could just have another massive fuck-off war. I think we’re poised at the decision point between those two pathways.

    Auckland • Since Nov 2006 • 10653 posts Report Reply

  • BenWilson,

    Nationalization is a possibility, but I think another possible model that achieves much the same end is for all people to eventually be the shareholders in the massive corporations of the world. A pathway to achieving this could be compulsory investment. Compulsory super schemes, in other words.

    Auckland • Since Nov 2006 • 10653 posts Report Reply

  • Hilary Stace, in reply to Matthew Hooton,

    There is a trial in India financed by Unicef. Only those there at the beginning get the UBI. If you move into the area you don't. There are other trials in other countries. He says trials are the way to start.

    It is apparently all in Guy Standing's latest book (about to come out) and the presentation he gave to the Fabians in Wellington last week is going to be posted on the Fabians website eventually. He answered all the questions raised on this thread and many more in a fascinating lecture to a packed hall. People are really receptive to this idea.

    Wgtn • Since Jun 2008 • 3214 posts Report Reply

  • BenWilson,

    @Matthew Hooton

    It's good to hear you support a UBI on principle. I don't really agree, however, that engaging with the debate the way you did is helpful, if this principle is genuine. It looks and sounds like you want to kill the idea stone dead, when you make wild claims of it's extreme cost.

    If you really do support the idea, then help us out on costing it so it works. Even better, convince people in National to do so with the huge resources that government can bring to bear. Hell, if National proposed a workable UBI, I might even vote for them, and that's currently a long way from my position. Your claim that Lockwood Smith was working on it is literally the first I've heard about that. I don't subscribe to the NBR, nor will I, on principle that I don't intend to pay to discuss things with you. You could help out by summarizing what exactly it was that Smith did. Maybe it's a good starting point for a bipartisan effort.

    It doesn't look that way when all the free publications with massive reach are just publishing articles from senior Nats and their advisors that are completely dismissive and non-engaging.

    Auckland • Since Nov 2006 • 10653 posts Report Reply

  • Deborah,

    Treasury-A-Guaranteed-Minimum-Income-for-New-Zealand .PDF

    NZ Treasury paper on guaranteed minimum income, prepared for the Welfare Working Group in 2010.

    (edited to remove a double link)

    New Lynn • Since Nov 2006 • 1447 posts Report Reply

  • Ian Dalziel, in reply to Matthew Hooton,

    Sticks and stones...

    It seems to me Labour hasn’t thought any of this through properly, but other people have, for many years – and that Labour has just gone on gooey eyed at the leftie celebrity economist they brought out to their conference.

    They never said they had 'thought it through', just that they wanted to start a discussion on it - you know a civilised one where people don't dismiss other people's points of view out of hand with phrases like 'leftie celebrity economist' - by whom I assume you mean Robert Reich - who was 'right' enough for republican President Gerald Ford, and for Time magazine to name him one of the Ten Best Cabinet Members of the century, etc... - and he endorses Bernie Sanders for President - sounds like a man with his head screwed on , not up, to me.

    But hey go ahead, keep tossing those dead cats and cherry-picked faux facts into the 'conversation'.

    Christchurch • Since Dec 2006 • 7944 posts Report Reply

  • Matthew Hooton, in reply to BenWilson,

    Auckland • Since Aug 2007 • 194 posts Report Reply

  • Matthew Hooton, in reply to Ian Dalziel,

    By

    ‘thought it through’,

    I mean even in the sense of thinking how a conversation would progress.

    Auckland • Since Aug 2007 • 194 posts Report Reply

  • Keir Leslie,

    Also, I don't see why you'd need a "controlled experiment" - that's obviously impossible. A pilot - to see if there's any horrendous downsides, or problems to fix - is a different matter.

    Since Jul 2008 • 1452 posts Report Reply

  • BenWilson, in reply to Matthew Hooton,

    At the last minute it was pulled, for fear it might be seen as official National Party policy, and it was not. Seven years’ work and, even if I do say so myself, some pretty good ideas that could have perhaps gained me another PhD had it been done in a university environment—now no more than spam. I cannot even claim it made it to the trash bin of political history.

    No wonder I'd never heard of this. In Lockwood's own words, the problem was National killed it outright.

    Auckland • Since Nov 2006 • 10653 posts Report Reply

  • andin, in reply to Matthew Hooton,

    how a conversation would progress.

    Well Im guessing they somehow knew (funny that) there would be a flurry of attack mutts, first up, screaming
    “MONEY!” “WHO"S GOING TO PAY?”
    Then after that, who knows :-))

    raglan • Since Mar 2007 • 1890 posts Report Reply

  • Ianmac, in reply to Matthew Hooton,

    Lockwood Smith Tax and Social Welfare is about 3/4 down his valedectory speech starting @:
    Not many would know that I put 7 years’ work into a project to redevelop New Zealand’s income tax, benefit, and tax credit systems. The work started on trying to find a way round the massive churning involved in employers deducting PAYE, only for the Government to pay it all back to some employees in family tax credits....... "

    "At the last minute it was pulled, for fear it might be seen as official National Party policy, and it was not."
    Wonder why currently the teams of National naysayers are labelling it as "Labour Policy?"

    Bleneim • Since Aug 2008 • 135 posts Report Reply

  • BenWilson, in reply to Deborah,

    Some interesting stuff. Obviously it's a lot of work to detail a model, and there is no limit on the number of possible models.

    Hence the discussion really needs to specify objectives at the outset. I'm kind of trying to do that with my graph above, to show what the idealized aim is. Essentially, I see it first and foremost making total poverty a thing of the past. No one at all should make less than the UBI (well OK, maybe children). Secondly, it removes the EMTR problem Matthew rightly points out as a very major problem with our current benefit system.

    Thirdly, at least in my picture, and I'm by no means set on this, the small total increase in overall spending could come from increases in income taxation. Exactly how that could be done is open for debate, and it's not the only possible source. I'm just trying to show in proportion how small a problem that really is. If the aim is, for the most part, to neutrally switch out other benefits, then only the bit shaded with diagonal red is actually new cost. So it only needs a piece with the same area taken as increased taxation to balance it out.

    I drew that area much bigger than it is proportionally, just so it could easily be seen.

    Auckland • Since Nov 2006 • 10653 posts Report Reply

  • Sacha, in reply to Keir Leslie,

    Here's the bit from the discussion paper which frames up the "preferred option'

    Thank you. Why are you the first person I've heard that from? Couldn't that have been in one of their media releases or something?

    Ak • Since May 2008 • 19719 posts Report Reply

  • BenWilson,

    Attachment

    Here’s a better pic, done with R. The red area is increased cost, and roughly corresponds to all the people who would benefit by being dragged out of the worst kind of poverty. The blue area is increased revenue. I made it exactly the same size just by working out how big the red area is and adding a flat tax rate increase for all brackets so that the revenue would be the same. The green area is the same size again and just shows a bit more clearly where that tax would be coming from.

    This simple increase is about 17% on the total income tax take, so means each group pays 17% more tax. Note: This does not mean their rate increases by 17%. It means that if they’re on, say, 30%, then that goes up by 17% to about 35%. If they’re paying 10%, it only goes up by 1.7% to 11.7%.

    I hope it’s a little clearer from this graph how small the cost of a UBI could be, if a neutral swap like this could be achieved. It would cost about 4.6 billion, which could be paid for by everyone having a 17% higher income tax bill. Again, this is NOT saying that everyone’s rate goes up 17%, so that they’re paying Current Rate + 17. It’s Current Rate * 1.17.

    I’m not fixed on this particular tax change. Just demonstrating it can be done. Nor have I gone into detail about how benefits could be adjusted to ensure that the distribution looks like these curves. That’s a shitload more work. This is just an idealized model of what I think we’re aiming for.

    ETA: Forgot to note, the income figures are real, taken from the IRD’s spreadsheets on income distribution, in 2014. Yes, it really does hockey stick like that at the end. Yes, the 1% really are real.

    ETA2: The dashed line is the UBI. I hoped that was obviously, but I guess I should say.

    Auckland • Since Nov 2006 • 10653 posts Report Reply

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