The Negative Income Tax

Your "low accuracy - high precision" argument is very interesting. I admit that indeed the Mincome study had to take that into account. ************************************************************************************************************ Your quote: "Objection : What does prevent the employers from adjusting wage rates in order to discharge costs on the state. Ex : Mincome is set at 1000$ per month. Mr. Mario who works as an apprentice plumber earns 1000$ per month and therefore nothing is added to his income Mr. Luigi who works as a pizzaiolo earns 700$ per month. Mincome will provide him with the extra 300$ What would happen if Mr. Mario employer decided to cut his salary to 700$ (or hire new personnel at 700$) ? The state would have to set minimum wages for every single job type to prevent this situation. This would make mincome pointless ! In addition, Labour market flexibility would substantially drop and we could expect involuntary unemployment to rise (since demand-offer courbe is no longer followed)." Objection: If Mr. Mario knows that he could get 1000$/month anyway, he would have the power to negotiate his salary in a fair way with his employer. Mr. Mario would probably say "Listen boss, if you don't pay me more than a 1000$/month, I simply quit, I will get mincome anyway" So you see, employers will have to offer wages higher than mincome if they want to attract any employees. Now you might be tempted to object that Mr. Mario would accept low-wage jobs, work less and thus earn less in order to get half of his income covered by mincome. Since this is plausible the state could indeed set a Minimum wage for all jobs, that would be at least as high as Mincome. To be honest, I see nothing wrong with this. Mincome and Minimum wage could work hand in hand: If you lost your job, you get mincome and if you work, you'll get at least minimum wage + you have a lot of negotiating power. *********************************************************************************************************** Your first quote: "Objection 1 : "if you give a man a fish he is hungry again in an hour. If you teach him to catch a fish you do him a good turn". Ok so this is about giving everyone free fish forever hoping that they will learn fishing." I have no objection here, I completely agree with your quote. But don't forget, mincome wouldn't "give you free fish", it would just be the "fishing rod" that would help you catch the fish. If you know what I mean. Consider this: Why do most western countries have Universal Healthcare and free education? Easy! Because most people realize that if you want to work, you must be healthy and educated. So the state ensures that everyone is healthy and educated enough to enter the labour market. However, being smart and healthy isn't enough if you want to work. You also need food that will give you enough energy to work and you need a decent shelter if you don't want to freeze to death during winter. So Mincome would be set high enough, so that you can access these necessities, But will be low enough to give you an incentive to work and purchase with your own money the luxuries you desire (iphones, a car, a TV and you name it). Your second quote: "Objection 2 : If the money comes from outside, it just makes more aid to Africa. The purpose of humanitarian aid is to increase people's quality of life. But it also sustains artificially an unsustainable situation. However I see that the final idea is to take that money from taxes. Very well ! How can Namibia find this money considering they already have a 5,5% of gdp public deficit ?" Objection: I totally agree that it would be difficult to implement mincome in poor countries. But we should first ask ourselves why so many African countries are poor. One argument is that most African leaders make deals with western companies to suck the wealth of their own people. Another argument is that poor countries (especially in Africa) have to pay back all the money the World Bank or the IMF gave them at very high interest rates. And add all the wars to it. Now this is getting a bit off-topic so I'll stop here but you know what I mean. Your third quote: "Objection 3 : If we assume that the state intervention is the only possible solution to prevent poverty why should the state just give money to people for nothing ? The state could employ people or orient them towards a sector needing workforce (perhaps by sponsoring studies)" That's true, and it's already done in most countries, especially in Austria, Sweden, Switzerland... but this system is reaching it's limits. In Sweden for example they hired unemployed people as substitute teachers in public schools. And it's a nice concept but many students complained that the substitutes weren't competent enough. http://en.wikipedia.org... ***************************************************************************************** Quote: "If there is a sum of money guaranteed for everyone regardless of what they do, there will always be some people taking advantage of the system." "There is no time limit to this aid. Therefore there are many cases of chronically assisted people. Some of them even top up working part time under the table. (That is fraud, and punished by jail time)." True, but that's something you can't avoid in any system. Even when it comes to healthcare some people have "accidents" on purpose so that they can get the insurance money aka. insurance fraud. But that doesn't prevent us from having Universal Healthcare. Small quote to better understand what I mean: "You must not lose faith in humanity. Humanity is like an ocean. If a few drops of the ocean are dirty, the ocean doesn't become dirty" - Mahatma Gandhi *************************************************************************************** Quote: "2) More tax pressure on people not receiving Negative income tax. And this represents the largest part of the population (most of them would probably be unhappy, others do not). Coercion is not the answer." "3) We can expect higher inflation rates on basic commodities. This would mean a substantial drop in purchase power for middle classes not benefiting from the aid. The mechanics are simple : If you induce demand artificially (by permanently giving money to people, in this case poor people) prices of basic commodities will rise." "4) Meritocracy, Meritocracy, Meritocracy ! In order to reduce poverty, the state should focus on making possible for the deserving poor to advance in society. I do agree there are some people forced in to poverty by the force of events even if they are competent and probably deserve better. I mean instead of guaranteeing minimum income for all, why not just increase education funding ? For undeserving poor the answer is not giving them taxpayer money. We have private charity for that and some other aid initiatives (e.g In EU , agricultural surplus is distributed freely to poor people )" Objection 1: There are many models for the negative income tax. But most models share the fact that they would replace several existing forms of social assistance and therefore wouldn't reduce the states annual budget. In Switzerland for example, we have an annual GDP of approx. 600 billion francs. The Swiss government is already using 180 billion francs (1/3) for existing social services. If the "Basic Income Initiative" succeeds, it is estimated that the government will have to use 20 billion more francs to finance the BI. In total about a 1/3 of our GDP. As you notice there isn't much of a difference, simply because many existing social services would be replaced. Now imagine a negative income tax initiative in Switzerland. It would cost even less than existing welfare. http://www.admin.ch... http://bien.ch... http://www.businessinsider.com... http://www.bbc.com... Objection 2: On the other hand, people need money if they want to consume and keep the economy going. Objection 3: Meritocracy is fair of course but have you considered technological unemployment which might be a problem in coming years? Once we arrive at that point we might have to rethink the way we manage our economy. One solution might be a BI or the Negative Income Tax, that way people who lost their job due to automation could study, volunteer and develop interests for arts. Maybe you think that most people wouldn't volunteer but per year the UN registers 90 billion work hours in Germany and 60 billion of these work hours are done by volunteers. http://revenudebase.info... Or we can go Star Trek style and have replicators and robots that do anything for us for free.