For those who follow it, Ontario, Canada has now announced that they’ll join Finland and The Netherlands in doing a trial of a universal basic income while New Zealand is considering it. This blog has been hinting at the possibility of a universal basic income as a possible answer to some of the island’s problems since back in 2007.
The basic premise of a universal basic income is to give a guaranteed income to all citizens/residents with no conditions attached. Every individual gets a monthly payment from the government with no requirements for how it is spent. In exchange, social benefits like welfare, housing, social security etc are phased out and eliminated.
One of the big reasons that a universal basic income is an attractive idea is that it greatly simplifies things. Governments have gotten far too big, complex and expensive. Around the world civil services have grown to unsustainable sizes trying to manage a complex myriad of programs and services. The trouble is that this leads to a great deal of administrative overhead that burdens the productivity of a society. A basic income is an opportunity to streamline government inefficiencies, eliminate waste and remove excuses.
People mistakenly think that a basic income program encourages people to avoid work. Instead, it has often been shown to do the exact opposite. It provides a rising tide that lifts the income security of all individuals. It reduces the risk associated with entrepreneurship and encourages more business growth. It puts more money in the hands of the poorer elements of society who are quick to put it back into the economy. It eliminates attempts to game the system and expectations of handouts. It encourages people to do more to supplement their basic income with part time and full time work. Overall it does more to encourage work and economic growth rather than discourage it.
The trick to a universal basic income is that it needs to be universal. No conditions, no bureaucracy, no complexity. In the ideal case, every individual gets X a month, rich or poor. In turn, every individual pays the same percentage of taxes. Effectively this creates a progressive taxation system without the complexity of a progressive taxation system.
In Bermuda’s case, there is a great deal of merit in flattening the duty system to penalize consumption of imported goods and use that to fund a basic income. While other countries are heavily reliant on a consumer element as the lifeblood of their economy, Bermuda’s economy is different. A large portion of every dollar spent on goods is sent off island.
Bermuda is far too consumption driven as we have a very high cost of living but also high earnings and thus a high disposable income in comparison to other countries. Bermudians have some of the highest percentages of tv, cellphone, computer ownership on the planet. Home ownership however is far out of reach for a great many. It is far too easy to consume and discard as it is unrealistic to afford a future. Bermudians aren’t known for repairing and making things last. Too often we toss it and get another. We shouldn’t be encouraged to live like that. Our tax system could encourage more investment in making things last and create jobs around making it a reality.
How could we do it?
- Eliminate work permit requirements for skilled positions traditionally unfilled by Bermudians
- Reintroduce furlough days
- Flatten the duty system for everything except cars at 25%
- Use the proceeds to create a basic income with a portion going to paying off the debt.
Since Bermuda produces almost nothing, a good pairing would be to simplify the duty structure towards a single higher rate and use the proceeds to fund a basic income.
It will be interesting to see how these three basic income experiments work out.