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Tuesday, June 29, 2010

Grundeinkommen (Basic Income)

I have come across a German film on an unconditional basic income, which in German is called the 'grundeinkommen'. I propose a similar 'shared base income', but it is funded from a flat 50% tax on incomes and profits from trade. The grundeinkommen funding is by a proposed 50% tax on goods and services (a value-added tax), with the removal of all income tax (the corporate tax situation is unclear).

The film is a very good introduction to the unconditional basic income (also variously known as the 'universal income' or 'guaranteed income'), explaining the concepts clearly. Unfortunately, only 85% of the video has English subtitles. If you speak German and English please do translate the remainder. The English subtitles cut out 81 minutes in (it's 98 minutes in total), so it's still worth watching for English speakers up to that point. The link below will take you to the film (where there are also options for contributing translations).

http://dotsub.com/view/grundeinkommen

I have highlighted, commented and added some responses below to parts of the film, but there's a great deal more to learn from watching it, especially if you haven’t come across the unconditional basic income proposal before (and of course I've only been able to make out the 85% translated).

In the film people are asked if they would continue to work if an unconditional basic income were introduced, and the results of a survey on this question are given. Sixty percent of people say they would continue to go to work as before if there was a basic income. Thirty percent would continue to go to work, but part-time or in a different job. Ten percent say they would take a break and then do something different like looking after others or studying.

But asked if they thought other people would go to work, eighty percent said, 'No, it would be impossible to get others to work if there was a basic income.'

So all people say they themselves will continue to work or contribute in some way or form (maybe after a 'break'), but they don't think others will.

"…the point of an income is to enable [people] to work [contribute], rather than the income being the reason for working [contributing]." Gotz Werner (wealthy German entrepreneur).

The German debate is much further ahead than the New Zealand one (where I am), but this could change quickly if we see it as the right thing to do and a major political party supports it.

The video recommends just a goods and services tax (such as VAT or GST) of 40% to 50%, no income tax. This single tax on price is recommended because it is deemed to be clearer and simpler – as whatever income taxes there are, they are ultimately part of the price we pay for goods and services anyway. Eliminating income tax is also recommended because it is a tax on income-paying work, and thus increasing it (instead of GST), while introducing a unconditional basic income, could decrease the amount of income-paying work people undertake and, thus, the level of the basic income.

However, sharing the income from paid work and profits can have positive affects, especially at a flat 50% rate. At a flat rate, higher income returns are predictable and consistent, so earning from, and undertaking, paid work (we want to do) is not discouraged if it is in tandem with a base income all people receive, it is simply additional income. The idea and the perception (and the reality) that we share the income from our paid work in an income we all receive is positive. It can help move the incentive for 'work' from being mostly about income and profit to being mostly about contribution and fulfilment.

Mechanised production is effectively tax free to the degree it is mechanised as machines are not paid an income that is taxed. This encourages mechanisation. Were income tax removed and good and services tax increased, then, potentially, human produced goods would be cheaper and machine produced goods more expensive. This might mean a greater encouragement of menial labour, of course this would be mitigated by the base income so that we might choose to mechanise because people would not take menial work or only at rates that still made mechanisation more affordable. But this is not terribly strong mitigation, and certainly not fool proof. There could well be an issue with greater human exploitation (or even just a more subtle affect to greater acceptance of menial work) over mechanisation if income taxes were removed and replaced by only a goods and services tax.

The film asserts that income taxes 'spare us caring' but it can be well argued that the tax on goods and services spares us caring even more, and could lead some to feel their exorbitant and wasteful consumption actually does good. The elimination of income tax could also unleash larger income inequality, self-justified by the unconditional basic income and the shared nature of the tax on goods and services. Such a system may make organised 'sharing' of the income and profits from trade seem unnecessary, giving rise to a new idea of 'invisible hand' or 'trickle down' economics and a radical enhancement of the pure pursuit of profit (without a care) motivation.

What is the nature of employment and work? Should we see ourselves as all in business, as all being micro-businesses? We share half the income from our trade in our products and services. There is no additional tax on our products or services and we receive a base income (directly linked to the income from trade) that enables us to contribute as we wish, when and where see a need. If we automate and mechanise then we can diminish our costs and our prices. Things can become close to free for all. Deflation occurs not as a result of low demand and economic contraction, but as a factor of increased technology and mechanisation. Incomes will not need to be high. Some products and services will be hugely popular, this always happens, but the income that occurs from this popularity is spread in the shared base income and in the price lowering devices of mechanisation and technology.

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