Reply to post:

View from a Reg reader: My take on the Basic Income

SImon Hobson Bronze badge

You're no longer going to be slaving 70 hours at a restaurant for £350 a week while the multimillionaire proprietor takes all your tips and the state makes up the difference. You're going to be slaving for 70 hours a week for £350 a week on top of the £500 or whatever the state is furnishing you with

Except it won't work like that.

You might get something more like (say) £250/wk from the state. But you won't still be getting £350/wk from your 70 hour job - the flipside of a state basic income is that taxes will kick in sooner and faster on anything you do earn. It only really works if the net result is that most people are more or less about the same financially. If lots of people are significantly batter off then it's not affordable, if lots of people are significantly worse off then it's politically not going to happen.

Lets say, just for the sake of easy numbers, that the basic income was set at £10k/year. For someone currently earning (say) £15k/yr to suddenly be on £25k/yr just wouldn't work - so their tax would need to go up. Just eliminating the personal allowance wouldn't do it as that would mean paying 20% on £25k (so taking home £20k) vs paying 20% on £4k (and thus taking home £14.2k before).

So the basic rate of income tax would have to go "quite a bit" to make the books balance - and then you have the "not really poor and not really well off" middle ground at a real disadvantage.

Lets say (and yes, ignoring other taxes like NI for the sake of illustration) you tried a cost-neutral approach. Everyone gets about £2k/year basic income, but the personal allowance is cut to just £1k. Someone earning (say) £15k would currently take home £14.2k (£800 of income tax, 20% of £4k). Afterwards they take home £12,200 from the job and get another 2K from the government - £2k of tax has been added by removing the personal allowance and given back by way of basic income.

But £2k is clearly nowhere near enough to live on, so it doesn't remove the problem.

Make the basic income more than £2,200 a year and you can't offset the cost be reducing the personal allowance. So then you have to start increasing the basic rate, that hits lots of people hard, and a change that's going to hit lots of "hardworking middle englanders" disproportionately is going to be very unpopular.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon