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Keith Rankin’s Chart of the Month – Budget 2017: New Zealand’s ‘Universal’ Basic Income up to $195 per week.

[caption id="attachment_14565" align="aligncenter" width="979"] Increase in unconditional Public Equity Benefit. Chart by Keith Rankin.[/caption]

The big unnoticed story of last Thursday’s Budget is the increase in New Zealand’s quasi Universal Basic Income (UBI), from just under $175 per week ($9,080 per year) to precisely $195 (annual $10,140).

It’s actually particularly pertinent that Stephen Joyce acknowledged, by including these ‘tax cuts’ in his ‘family assistance package’, that ‘raising the tax thresholds’ represents in fact a form of benefit increase. I call the unconditional benefit that is embodied within our tax scale, the Public Equity Benefit (PEB).

(I claim naming rights because nobody else has bothered to name this unconditional benefit that is implicit within traditional graduated tax scales. Also, the name ‘Public Equity Benefit’, which embodies the visionary concept of public equity, offers much more for the future than the prosaic alternative name ‘personal tax credit’. Language matters.)

From the chart, we can clearly see that the PEB is not a true UBI. Persons grossing less than $70,000 per year do not get the full amount. However, we can say that most people grossing less than $70,000 do receive some conditional cash benefits which, when added to their unconditional PEB, take their total weekly benefits to $175 (or more).

In a fiscal sense, the cost of topping up so that all adults’ unconditional and conditional benefits total at least $175 per week is minimal. (An interesting case, however, affects my teenage son. He receives a ‘student loan living allowance’ which represents the same amount of cash as a student allowance. In the future, he will be required to ‘pay back’ his quasi student allowance, by means of a tax surcharge. The logic of universal unconditional benefits requires that ‘student loan living allowances’ should be no more subject to being ‘paid back’ than the unconditional Public Equity Benefits which all salary/wage earners receive.)

An important feature of the 2017 Budget is that, in line with the announced increase in the unconditional PEB to (upto) $195 per week, there have been significant increases in income-tested cash benefits – Family Tax Credits and Accommodation Supplements – to many of those people who have been short-changed by present anomalies in these benefits.

The 2017 Budget represents a significant step towards the inevitable acceptance of a genuinely universal ‘basic income’. Once this conceptual milestone has been achieved, we will then be able to understand that inequality and poverty are largely a consequence of the present tax rate (33%) and the present ‘universal’ basic income ($175 per week) both being too low.

Raising the weekly ‘universal’ basic income to $195 is a handy first step towards reducing inequality without resorting to increased ‘redistribution’ (and all the tragic bureaucracy that targeted redistribution entails).