Lowell Manning
19 Epiha St.
Paraparaumu 6450
New Zealand
      tel. & fax 04-298-6890
      e-mail manning@home.kp.planet.gen.nz

The paper provides, perhaps for the first time, a simple way to avoid anomalies in UBI distribution by treating a household as an additional "divisible" person.

A practical implementation method is provided using the electoral roll (habitation index).

The method provides seamless income distribution that closely matches existing income guarantees and expectations.

Once the conceptual feasibility of UBI has been accepted, the primary question is:

How do we provide a universal income to all without creating anomalies so that some people like single parent families and elderly people living alone do not finish up worse off than they are under the present pension/benefit regime?

It is noted that everyone will have their own bank account (possibly with a new publicly owned NZ Universal Income Bank established to distribute UBI and handle everyday chequeing and cash services ) that will enable direct credit transfers of UBI payments to be made by computer.

The workshop questions are to stimulate discussion and further research.

Some workers in the UBI area have been suggesting that special allowances should be payable to disabled or ill people to help them maintain a quality of life comparable to those more fortunate.

However, this destroys the universality of the UBI. The best way to deal with special needs is to fund them directly through the health service. The needs, are, after all primarily health related.

Far and away the greatest distortions in the UBI arise from fairly distributing the costs of housing. In a four person family household costs are effectively shared from four UBI payments, while someone living alone, on the face of it, has to pay the whole of the housing cost.

Some UBI proponents have suggested a system of means tested accommodation benefits to "top up" the UBI, but such an approach is then NOT universal, and also requires a cumbersome bureaucracy to be maintained to implement it.

This paper proposes to overcome the issue of accommodation costs by providing each private household its own UBI in addition to the individual UBI payments. The private household UBI would be paid automatically into the accounts of all adults (those people over 18) registered on the electoral roll resident at any given address. If there is one such adult resident at an address and registered on the roll, that person would receive all the household UBI. If there are three adults resident at the address, each would automatically be paid a third share and so on. Where no adults are registered at an address (such as when the property is unoccupied or is a holiday home) no household UBI would be payable.

The level of the private household UBI would need to exceed the current maximum accommodation supplement paid by Social Welfare (About $100/week in Auckland), For simplicity, and for conceptual integrity, it is set in this paper at the same level as the proposed individual adult UBI, though it is by no means essential to do this.

Striking it at this level encourages people (as does the UBI itself), other things being equal, to move away from high cost areas to lower cost areas. This is highly significant because UBI may reverse the present urban migration to the larger cities in the hope of finding work. Many people will be better off living elsewhere, revitalising the countryside.

Voter registration is already compulsory by law, though some people don't bother to register. The household UBI will ensure in practical terms that almost everyone will be encouraged to register in order to qualify for their share of the household UBI. The obvious roll format to use is the existing habitation index that lists voters by household and street.

There will be a strong incentive to correct the electoral roll registration on moving residence. In fact, those resident at an address would normally advise the electoral office when someone moves out, because otherwise their own share will be relatively decreased. For example, if there are three adults in a household they would get, say, $40/week each. If one of the adults leaves they would be entitled to $60/week each. And if one leaves, but doesn't report a change of address, and another person takes his or her place, the three resident current resident adults would get just $30/week instead of $40/week. So it is in the common interest to ensure that changes of address are registered.

If someone tries to "cheat" a resident out of their share by reporting them gone from their place of residence, the UBI payment of the "cheated" person would stop until they re-registered somewhere else. Anyone whose payments are unfairly stopped will know from their bank statement their UBI household payment has not been credited. The terms of reference of the disputes tribunals could be extended to provide immediate redress. There would be a substantial mandatory fine and perhaps a period of community service for deliberate "cheating", and incorrect payments would be corrected by computer entry on a case by case basis.

The rule, then, would be that each individual would change their electoral roll address on ARRIVAL, and the individual AND/OR remaining resident adults would check the registration is deleted on DEPARTURE.

While it is compulsory to register on the electoral roll already, those adults who are not registered and choose not to do so would not be punished under the UBI legislation (any action being left to the electoral law legislation as at present). But such persons would not receive their share of a household UBI and would not be entitled to do so.

It would be an offence to attempt to be registered at more than one address. It would be a criminal offence of fraud to register on the electoral roll under a false name, to register for an unoccupied or non-existent address or to buy or sell "residency" in such dwellings. The penalties for defrauding the state would include forfeiture of the household UBI for a determined period, a fine, community service and/or a prison sentence.

Those people in long term hospital care, in prisons or other publicly funded institutions will not be entitled to a share of a household UBI. Their payments will stop automatically on entry (but note importantly that the FAMILY of such people will NOT suffer as a result, because the household payment would be re-distributed among the remaining adult members of the household).

Those people living PERMANENTLY in hotels, boarding houses, camps, motels and the like would qualify, but their payments might become very small if there are a lot of adults at a particular address.

There is a strong emphasis in the UBI concept towards household formation as distinct from living alone. As the size of the household increases, so does UBI income, making family and co-operative living arrangements far more attractive than has been the case in recent years. At the same time, the concept ensures that those who wish to have their own household can viably do so.

(There is always the alternative of treating a room/site as an address in its own right, if it is a part of commercial premises, though it is questionable whether in fact such living arrangements should be encouraged on a permanent basis.)

With the household UBI in place, it is now fairly simple to work out the cost of UBI in terms of individual and household payments, both on a nation-wide basis and on the basis of family units.

(The figures in this paper are just indicative and need to be matched against recent census data)

1. Number of occupied dwellings:  1,000,000
2. Number of adults:              2,600,000
3. Number of persons under 18:    1,000,000
4. Household UBI:                 $120/week    $6240/year
5. Adult UBI:                     $120/week    $6240/year
6. Under 18 UBI:                  $ 40/week    $2080/year
7. Tax on earned income:                 49%
8. Target minimum income: single 55%  average = $250/week
9. Target minimum income: double 73%  average = $330/week

Are the target minimum incomes realistic, and how do they compare with present GRI levels?

How would you go about "fine tuning" guaranteed income levels?

GROSS COST
household UBI: $6.24 billion
adult UBI:     $16.22 billion
child UBI:     $2.08 billion
TOTAL:         $24.54 billion

However, this is NOT a net transfer value of course. ALL taxpayers ALSO get their UBI payments back tax free. On present levels of earned income taxed at 49%, the total taxation is in the general order needed to fund the proposal if current levels of indirect and other taxes are maintained in some way. As the examples below show, the net transfer levels agree pretty well with current expectations.

Because UBI distributes income on an individual basis, afford ability depends not so much on individual earned incomes but on the net household incomes and the overall tax rate on those incomes.

The tax rate used in this paper should not be considered definitive until after the various income and tax permutations have been considered.

Other factors are also important. For example, if a Financial Transactions Tax were used to replace GST, most effective household disposable incomes would rise accordingly, and it would be rational to take such factors into account when deciding what tax rate to apply to earned income. If health services and education are fully funded instead of user pays, there would be a further corresponding increase in disposable incomes that should also be taken into account.

What are the current level of transfer payments in the form of benefits, superannuation, student and accommodation allowances?

What is meant by a "net" transfer level in the above calculation, and how would you go about working it out?

a) Single person living alone    120+120 = $240/week
b) Two people                    120+240 = $360/week
c) Single parent one child    120+120+40 = $280/week
d) Single parent two children 120+120+80 = $320/week
e) Two parents one child      120+240+40 = $400/week
f) Two parents two children   120+240+80 = $440/week

However, while these figures are in the right range compared with current government provision, there are many other advantages. For example, there would be no surcharge on elderly people and no abatement of the UBI for any level of earned income. Anyone can maximise their income subject only to payment of the earned-income tax rate. It is ALWAYS worth working or seeking an investment income and everyone 'competes" on a equal basis.

How do the above figures compare with the present levels of pensions and benefits.

What corrections need to be made to get a better match against existing payments?

Leaving other things as they are, we would want to compare overall tax on household incomes. UBI creates a perfectly progressive "seamless" tax curve starting from zero if the UBI is your only income, and increasing steadily until it approaches 49%, though it will never quite get there.

a) Single person living alone

Earning  5000 + UBI 12480;   tax  2450 on total 17480 = 14.0%
Earning 15000 + UBI 12480;   tax  7350 on total 27480 = 26.8%
Earning 30000 + UBI 12480;   tax 14700 on total 42480 = 34.6%
Earning 50000 + UBI 12480;   tax 24500 on total 62480 = 39.2%

b) Two person household both earning

1 earning  5000 + UBI 9360;  tax  2450 on total 14360 = 17.2%
1 earning 15000 + UBI 9360;  tax  7350 on total 24360 = 30.2%
Household tax  9800 on total 38720 = 25.3%
Net household income $28920 = $556/week

1 earning 10000 + UBI 9360;  tax  4900 on total 19360 = 25.3%
1 earning 30000 + UBI 9360;  tax 14700 on total 39360 = 37.4%
Household tax 19600 on total 58720 = 33.4%
Net household income $39120 = $752/week

c) Household income Single parent one child

Earning  5000 + UBI 14560;   tax  2450 on total 19560 = 12.5%
Net household income $17110 = $329/week

Earning 15000 + UBI 14560;   tax  7350 on total 29560 = 24.9%
Net household income $22210 = $427/week

Earning 30000 + UBI 14560;   tax 14700 on total 44560 = 33.0%
Net household income $29860 = $574/week

Earning 50000 + UBI 14560;   tax 24500 on total 64560 = 38.0%
Net household income $40060 = $770/week

d) Household income Single parent two children

Earning  5000 + UBI 16640;   tax  2450 on total 21640 = 11.3%
Net household income $19190 = $369/week

Earning 15000 + UBI 16640;   tax  7350 on total 31640 = 23.2%
Net household income $24290 = $467/week

Earning 30000 + UBI 16640;   tax 14700 on total 46640 = 31.5%
Net household income $31940 = $614/week

Earning 50000 + UBI 16640;   tax 24500 on total 66640 = 36.8%
Net household income $42140 = $810/week

e) Household income two parents one child

1 earning   Nil + UBI 10400;   tax   NIL on total 10400 =    0%
1 earning 15000 + UBI 10400;   tax  7350 on total 25400 = 28.9%
Household tax  7350 on total 35800 = 20.5%
Net household income $28450 = $547/week

1 earning  5000 + UBI 10400;   tax  2450 on total 15400 = 15.9%
1 earning 30000 + UBI 10400;   tax 14700 on total 40400 = 36.4%
Household tax 17150 on total 55800 = 30.7%
net household income $38650 = $743/week

1 earning   NIL + UBI 10400;   tax   NIL on total 10400 =    0%
1 earning 50000 + UBI 10400;   tax 24500 on total 60400 = 40.6%
Household tax 24500 on total 70800 = 34.6%
Net household income $46300 = $890/week

f) Household income two parents two children

1 earning     0 + UBI 11440;   tax     0 on total 11440 =    0%
1 earning 15000 + UBI 11440;   tax  7350 on total 26440 = 27.8%
Household tax  7350 on total 37880 = 19.4%
Net household income $30530 = $587/week

1 earning  5000 + UBI 11440;   tax  2450 on total 16440 = 14.9%
1 earning 30000 + UBI 11440;   tax 14700 on total 41440 = 35.5%
Household tax 17150 on total 57880 = 29.6%
Net household income $40730 = $783/week

1 earning     0 + UBI 11440;   tax     0 on total 11440 =    0%
1 earning 50000 + UBI 11440;   tax 24500 on total 61440 = 39.9%
Household tax 24500 on total 72880 = 33.6%
Net household income $48380 = $930/week

The tax curve looks like this:

The maximum marginal tax rate is therefore just under 49% on the basis of the present proposal.

Work out typical incomes for professional workers and for single income cases (such as where one person is sick or disabled), and compare with what those households would receive now.

Work out typical incomes for cases where there are more than two children and compare with what those households would receive now

Would the figures for professional people with dependent children encourage them to seek day care, and expand the service employment base?

At what net household income levels does household income begin to reduce compared to what is the case under the new July 1996 tax provisions?

Work out typical incomes for cases where there are more than two children and compare with what those households would receive now.

Work out, in rough terms your present family income as of today and compare it against the above figures.

Work out typical examples showing what happens to the net household income when there are more than two adults in a household, for the various cases when they are working or not working (e.g. students, ill, disabled).

Work out present household incomes for some of the examples and compare them to those obtained under the UBI proposal.

The primary and conservative test is to ensure household tax rates are in line with present taxation levels.

Single income living alone:
  26% on 27000, 34% on 42000; OK

Two people both earning:
  25% on 38000, 33% on 58000; a bit marginal

Single parent one child:
  25% on 30000, 33% on 45000; just OK

Single parent two children:
  23% on 31000, 31% on 46000; a bit marginal

Two parents one child:
  21% on 36000, 31% on 56000; a bit low

Two parents two children:
  19% on 38000, 30% on 58000; a bit low

Any corrective action really depends on how other policies are "packaged" as it needs to be borne in mind that while tax increases quite sharply with greater family income, families without earned income pay no tax.

In as far as "benefits" and superannuation are concerned, the present proposal can deliver a comparable level of benefits to those applying at present. Depending on the level of detailed matching required, some thought could be given to slightly increasing the "household" UBI, decreasing slightly the individual UBI, and increasing slightly the child's UBI over the figures shown.

The household tax rates are "in the right ball park" when compared to the new tax rate regimes, but further work may show they need to be increased a little if the DISTRIBUTION of household incomes changes substantially as a result of the proposal.

Working for figures:

Tax rate on earned income  50%

Household   UBI  $150
Individual  UBI  $100
Child       UBI  $ 40

Gross cost: 9.36 + 13.52 + 2.08 = 24.96 billion

The workings show that once the concept of household UBI is accepted, the figures are remarkably insensitive to changes in the relationship between household and individual UBI easily enabling target criteria to be met (in this case the targets for one and two people living alone).

a) Single person living alone    150 + 100       =  $250/week
b) Two people                    150 + 200       =  $350/week
c) Single parent one child       150 + 100 + 40  =  $290/week
d) Single parent two children    150 + 100 + 80  =  $330/week
e) Two parents one child         150 + 200 + 40  =  $390/week
f) Two parents two children      150 + 200 + 80  =  $430/week

a) Single person living alone

Earning   5000 + UBI 13000;  tax  2500 on total 18000 = 13.9%
Earning  15000 + UBI 13000;  tax  7500 on total 28000 = 26.8%
Earning  30000 + UBI 13000;  tax 15000 on total 43000 = 34.9%
Earning  50000 + UBI 13000;  tax 25000 on total 63000 = 39.7%

1 Earning  5000 + UBI 9100;  tax  2500 on total 14100 = 17.7%
1 Earning 15000 + UBI 9100;  tax  7500 on total 24100 = 31.1%
Household        tax 10000 on total 38200 = 26.2%
Net household income    $28200 = $542/week

1 Earning 10000 + UBI 9100;  tax  5000 on total 19100 = 26.2%
1 Earning 30000 + UBI 9100;  tax 15000 on total 39100 = 38.4%
Household        tax 20000 on total 58200 = 34.4%
Net household income    $38200 = $734/week

Earning  5000 + UBI 15080;   tax  2500 on total 20080 = 12.5%
Net Household income    $17580 = $338/week

Earning 15000 + UBI 15080;   tax  7500 on total 30080 = 24.9%
Net Household Income    $22210 = $427/week

Earning 30000 + UBI 15080;   tax 15000 on total 45080 = 33.3%
Net Household Income    $30080 = $578/week

Earning 50000 + UBI 15080;   tax 25000 on total 65080 = 38.4%
Net Household Income    $40080 = $770/week

Earning  5000 + UBI 17160;   tax  2500 on total 22160 = 11.3%
Net household income    $19190 = $369/week

Earning 15000 + UBI 17160;   tax  7500 on total 32160 = 23.3%
Net household income    $24290 = $467/week

Earning 30000 + UBI 17160;   tax 15000 on total 47160 = 31.8%
Net household income    $32160 = $618/week

Earning 50000 + UBI 17160;   tax 25000 on total 67160 = 37.2%
Net household income    $42160 = $810/week

1 earning   NIL + UBI 10140;  tax   NIL on total 10140 =    0%
1 earning 15000 + UBI 10140;  tax  7500 on total 25140 = 29.8%
Household        tax  7500 on total 35280 = 21.3%
Net household income    $27780 = $534/week

1 earning  5000 + UBI 10140;  tax  2500 on total 15140 = 16.5%
1 earning 30000 + UBI 10140;  tax 15000 on total 40140 = 37.4%
Household        tax 17500 on total 55280 = 31.7%
Net household income    $37780 = $726/week

1 earning   NIL + UBI 10140;  tax   NIL on total 10140 =    0%
1 earning 50000 + UBI 10140;  tax 25000 on total 60140 = 41.6%
Household        tax 25000 on total 70280 = 35.6%
Net household income    $45280 = $870/week

1 earning     0 + UBI 11180;  tax     0 on total 11180 =    0%
1 earning 15000 + UBI 11180;  tax  7500 on total 26180 = 28.7%
Household        tax  7500 on total 37360 = 20.1%
Net household income    $29860 = $574/week

1 earning  5000 + UBI 11180;  tax  2500 on total 16180 = 15.5%
1 earning 30000 + UBI 11180;  tax 15000 on total 41180 = 36.4%
Household        tax 17500 on total 57360 = 30.5%
Net household income    $39860 = $766/week

1 earning     0 + UBI 11180;  tax     0 on total 11180 =    0%
1 earning 50000 + UBI 11180;  tax 25000 on total 61180 = 40.9%
Household        tax 25000 on total 72360 = 34.6%
Net Household income    $47360 = $911/week

© 1996 Lowell Manning

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