Universal Basic Income: its Core and Essence.

Keith Rankin, 23 March 1998


The term "Universal Basic Income" (UBI) represents in New Zealand both a positive approach to tax-benefit reform and, for want of a better name, a "New Left" social policy brand. It remains important that the branding does not overshadow the analytical core. And it is also important that the name retains its strong association with social liberalism, and hence its dissociation with the economic neoliberalism branded in New Zealand as the New Right.

The name "Universal Basic Income" arises in New Zealand from a paper I wrote in 1991 (The Universal Welfare State; incorporating proposals for a Universal Basic Income); a paper that spells out both the positive (ie analytical) and normative (moral philosophical) basis for the introduction of a UBI in New Zealand. As such, the UBI brand is linked irrevocably to my name. Therefore, it is of particular importance to me personally, as well as to the maintenance of clarity in the public debate on welfare issues, that the core analytical ideas are not lost sight of while the political branding process continues.

The core of a "UBI system" derives from the idea that benefits contained within the income tax scale are no more nor less than benefits paid through the social welfare system, and that the integration of the two kinds of benefits forms the basis for a truly universal benefit; that is, an equal benefit paid to all adult tax residents of a nation. For example, the 1991 paper mooted a universal benefit set at 20% of GDP per capita (then, about $6,000 per annum) combined with an income tax rate of 48%. Such a benefit might or might not be sufficient to meet the basic needs of every such citizen.

The core property of the UBI system is that trade off between the income tax rate and the amount of the universal benefit. All else unchanged (ceteris paribus), a higher universal benefit requires a higher income tax rate. This income tax rate must be proportional (or "flat" as it is often called1) because a proportional tax rate is the necessary consequence of splitting income taxation into (i) a public revenue fund, and (ii) a set of benefits (ie concessions). In a UBI system, there is no ambiguity; increasing tax concessions is conceptually the same as increasing benefits.

The core idea, that of universality, of horizontal equity, is the notion of treating equal (citizens) as equals. The idea that public income should be distributed on an equitable basis is neither a left-wing nor a right-wing idea. The essential difference between left and right lies in the division of total income between public and private. The right-wing view is that most of a nation's income is or at least should be private, and that therefore any divisions of public income will involve comparatively small amounts.

The Universal Basic Income brand is more than this core idea of universality; more than the equivalence of explicit benefits paid through the Social Welfare arm of Government and the implicit benefits paid through the Inland Revenue arm of Government. It is the "basic" element that marks the UBI out as a socially liberal brand. The underlying philosophy of the UBI movement is that every person should receive support commensurate with their basic needs, and that if they have no private means then they should receive sufficient public support. Thus the UBI brand reflects a reaffirmation of the ideals of the "cradle to grave" welfare state; ideals strongly affirmed in for example the 1972 Royal Commission on Social Welfare (the McCarthy Commission). The brand contains the concept of a true "guaranteed minimum income" as well as the concept of a core universal benefit (eg "citizens income" or "social dividend"). We can claim that this concept of "basicness" represents an essential feature that differentiates a UBI from a simple Citizens Income.

Recognising basicness as an essential feature of UBI does not mean that all individuals have the same basic needs. Any effective basic needs approach has to provide some element of "vertical equity"; a means of treating unequals unequally. Hence a UBI system must either provide for a two-tier system of benefits - one core tier for horizontal equity, and one essential tier for vertical equity - or the citizens income must be so high that the majority receive a citizens income set at a level much higher than that of their basic needs.

To reiterate, the core issue is to integrate tax benefits with social welfare benefits. The essential issue, over and above that, is to integrate supplementary benefits with citizens incomes. A UBI, as a benefit that meets basic needs, represents such a conflation of two benefit types; a conflation of a social dividend and a guaranteed minimum income. At its most elegant level of simplicity, supplementary (second tier) benefits are individually customised "supplementary basic incomes" (SBI) which retain the core property (that of a tax benefit trade-off) of the UBI system.2 Whereas in my 1991 paper I treated the UBI as simply a citizens income, with the SBI as an addition to it, the UBI concept has evolved to the point where the UBI, as a benefit, is the sum of the Citizens Income and the SBI.

While a UBI system has an impartial core and a socially liberal essence, these are minimum requirements. Any variation which is true to both core and essence can be called a UBI system. Thus a UBI system may pay additional benefits and make use of additional sources of revenue. A UBI system may include universal benefits to children, or to caregivers on behalf of their children.

There is nothing in the core or essence of a UBI that suggests a departure from the longstanding social differentiation between adults and minors. It is, I believe, universally true that, while both adults and children (ie minors) are citizens, minors (by definition) are dependent on adults; individually dependent on parents and guardians and collectively dependent on adult society. As dependents, children are supported from the incomes of adults. Thus, while it is essential that a UBI system meets the basic needs of families of all types, the payment of benefits directly to children is a radical option that is consistent with UBI but not essential to it.

In this short article, I have tried to clarify what a tax-benefit system must be in order to qualify for the UBI brand. The exercise is an inclusive one, in that it seeks to not exclude anything that may be regarded by different people as useful add-ons. It is also a restrictive exercise in that it represents an attempt to ensure that the integrity of the UBI's core mechanism and essential ideals are retained.



1.  Unfortunately the term "flat tax" has been branded in New Zealand as a neoliberal (ie right-wing) concept. In reality, neoliberals are unattracted to a flat-rate income tax set at 48%. Even 33% is high to most neoliberals, who are really interested in low taxes, not flat taxes. [return]

2.  This was the essential feature of my 1991 paper that set it apart from other basic income proposals at the 1991 University of Waikato seminar on Basic Income, and that led to an avalanche of public interest in the wake of a radio interview. [return]


© 1998

Rankin File | 1998 titles