Hi folks - another development from the Northern Hemisphere.

disclaimer: I have translated this for your information and it is not to be taken as a reliable translation for any other purpose than to get an overview of a central platform position.

It is not new as the idea of a negative tax combined with a flat comes straight from the pen of Milton Friedman; who must be cheering from whatever part of hell he is roasting in. While I am in favour of an unconditional basic income I am against a flat income tax regarding a progressive consumption tax to be fairer and more egalitarian but then I come from the libertarian left and being a pirate means learning to compromise - even if I want to vomit sometimes

warning: the document is long and not very polished. It is also very oriented to the German tax and welfare system which is different from NZ in many ways.

If you have questions about the proposal or the German tax/social welfare system I will try and answer them.

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A proposal for discussion – A Social State 3.0 – version 1.2
Published 8th June, 2012

A social model by pirates Michael Ebner and Johannes Ponader

The Pirate Party has spoken out for the right to a secure existence and social participation. This right should be realized with a so-called unconditional basic income.

A realization of these ideas will basically reshape the German tax and social system. Because these changes will have considerable consequences on the resulting economical data and so on the financing of such a basic income, the process should be restructured by splitting into several steps that are easy to oversee. Thus the results of each step can be observed and be incorporated into the planning of the following steps.

The suggestion presented here is to be understood as a "Step One″. With it we want to introduce a basic income (BI), even if it does not reach an amount which we hold for existence-protecting. It must be therefore combined with other welfare payments for persons with low incomes.

Nevertheless, the suggestions presented here do not limit themselves to the introduction of a basic income. Besides, we want to extensively consolidate the tax and welfare systems and so have a respectable base for the changes which are awaiting in the coming decades.

The suggestion presented here is not a policy of the Pirate Party but a suggestion for discussion within the Pirate Party. We want to prove seriously that an unconditional basic income can be financed in this first step. Not all the details in this proposal have been resolved to our satisfaction. In this sense we regard our draft as „better but not yet good enough“.

Premises

The model is based on the following premises:

The basic income must be of an adequate amount and be free from compulsion to work, sanctions or other considerations, otherwise meet all four criteria for a real unconditional basic income fully fulfil (Individual calculation, need check).
The model is developed on basis of the data of 2009 and on the basis of the price level at that time. The figures are, of course, to be adapted current prices.

We hold the present tax system and welfare systems to be un-reformable (too complex) and want to change them as soon as possible (that is as soon as the political will is available next year). From it follows:

The model must be implemented without a transition period and thus be completely financed.

We cannot wait until Europe wide taxation levels have been harmonised The competitiveness of Germany must be taken into consideration with the choice of the taxes and the taxation bases.
The consequences for the national economy can be roughly estimated only dependably if the model remains more or less in status quo. Then after a quick adoption the model can be developed gradually and warily in the directions required in each case.

Summary

The essential parameters are summarized here and then explained in the following segments.

A basic income which is paid to all people living permanently in Germany regardless of need. This basic income for adults should amount to 75% of the taxable subsistence level and for children and youngsters 150% of the taxable subsistence level. (On figures in 2009 489.63 Euro per month per person for adults and 483.00 Euro for children and youngsters.)
Supplementary housing benefit for low incomes.

Income tax, corporate tax and excise tax will be replaced with a flat tax of 45% . Incomes that do not reach a level to pay social security will be taxed with a 5% solidarity tax.
The change to a tax financed health system to replace the current health and care insurance schemes.

Continuation of unemployment insurance and pension scheme as an equally financed social security.

Raising value added tax to 20%

The abolition of unemployment benefit, child benefit, child raising allowance (these will be replaced with the minimum income)

Basic incomes and housing subsidy

Our draft intends a basic income which is paid to all people permanently living in Germany regardless of a need. Basically it would be desirable if this basic income could be of an existence-protecting amount. This is not yet quite realizable nowadays – nevertheless:

We have decided that we can create a completely existence-protecting basic income for the children and youth. Children are not able to provide for themselves and are forbidden from doing so by the child labour laws.

Nevertheless, we have with children and youth the situation that, according to the system used to calculate the tax subsistence level (decades of disadvantage of the families leads to the fact that with low income families there is not enough money for children and youth) this number, as a calculation basis, is clearly too low. Hence, we want to pay 150% of the present tax subsistence level and so use a value that social NGO's look to as an actual subsistence level for children and youth. For the year 2009 it would be the 483 Euro per month. This number is to be adapted according to inflation.



In the area of the adults we want to pay so much as we can finance seriously, currently this is 75% of the tax subsistence level, at 2009 levels it would be 489.63 Euro per month, also this figure is to be adapted according inflation.

The basic income should not be coupled to German citizenship, however the range of beneficiaries is to be defined in a way to prevent "basic income tourism" The precise definition of the regulations is not a component of this financing draft.

This basic income should substitute for the following welfare benefits which will be abandoned without substitute:
Child benefit
Unemployment benefit
Educational benefits
Child raising benefit

Using an average rent level we propose the following housing subsidy payments for people without income:

1-personal household 320 Euro
2-personal household 480 Euro
(For every other adult person 160 Euro would be paid in addition. Children and youth are not taken into consideration here because their residential costs are already covered in their basic income.)

In towns with an above-average rent level a higher housing subsidy is paid, in towns with a lower rent level a lower subsidy.

The proof of need should be calculated in a simple and data-efficient. Personal income is credited as a third (33.3%) of the net income (income after taxes and if necessary, social security contributions) for the housing subsidy claim, so that there remains an incentive to work. Personal wealth is disregarded. Sanctions are not planned.

Under the URL [url]http: //computerdemokratie.de/michael/calc3/Project12.html[/url] a calculator can be found with which the unconditional basic income can be calculated.



Changing the tax system to a Flat Tax

For the financing of this system we want to introduce a uniform tax rate ("Flat Tax") of nominally 45% on all incomes. This tax replaces the current income tax, the corporation tax and the excise tax. We hold the Flat Tax in itself as non-social f. Nevertheless, in combination with the basic income a de facto progressive course is achieved and with it the desired higher tax load on higher incomes.

From point of view of the net income this model is equivalent to a negative income tax. Nevertheless, a negative income tax must not be assessed in every isolated case, while with a combination of Flat Tax and basic income the far prevailing majority of tax payers do not need to be assessed. Thus for reasons of from administrative simplification and data efficiency we prefer the combination of basic income and Flat Tax.

In addition, there should be a solidarity tax of 5% of the income for incomes not liable social security insurance. Such incomes are capital gains and business profits, but also salaries beyond the threshold for social security insurance. Then such incomes are actually taxed at the Flat Tax rate of 50% (45% 5%). With it we go up to the border of that what has outlined the German Federal Constitutional Court with the half division principle.

With 50% old-age income is also taxed, according to the principle of pay-later taxation, nevertheless, only that part whose contribution payments comes from untaxed income in 2009 58% (the principle is explained under http: // de.wikipedia.org/wiki/Rentenbesteuerung). Because the basic income is paid naturally to pensioners this group is in a much better situation in particular when the receive only a modest pension.

The Taxation base is the total national income (1806 Bn. Euro in 2009), tax loopholes and exceptions should be removed (“ widening of the tax base ”). Taking into consideration effects like tax evasion and the insolvency of tax payers, we count on the financing side with a "tax decrease". This amounts with employee's remunerations to 1%, with business profits and taxes on capital income 6% (as an average of 2% with business profits and 10% with taxes on capital income). All together tax losses of 46.8 Bn. Euro are taken into consideration in our financing calculation. Less the present tax amount from income tax, corporate tax and trade tax a total of 656.3 Bn. Euro arise.

This extra income results, above all, from the fact that the taxation system now nominally has no longer a tax-free allowance and is no longer progressive. These are replaced with the basic income about which 479.5 Bn. Euro is issued. In combination of basic income and Flat Tax a progressive course arises in the final effect even if there are no progressive components included in the individual items.

The renunciation of progression in nominal taxation leads to the fact that the taxation system can be massively simplified and purified. Most of the taxes can be raised directly at source, then the greater number of income earners are no longer assessed.

Within the scope of this rearrangement the business tax should also be cancelled as businesses then pay a Flat Tax whose rate is about today's corporation tax rate. The business tax is anyway a German-specific feature which there is absent in most other lands and its abolition is, therefore, a contribution to tax harmonization. The single municipalities – the present receivers of the business taxes are to be paid a subsidy by means of direct allocations according to the number of inhabitants from the amount of the Flat Tax. With it the furnishing of finances of the individual local authority districts would become more uniform and the pathetic race to attract businesses by offering subsidies would end.

Corporate profits are nowadays subject to corporation tax, trade tax and – with the payment of dividends – with the Income tax component. According to the current progressive tax system t he shareholder gets about 51.5% after taxes from 100% of corporate profit before taxes. Enterprise profits with 50% (45% 5%) would be taxed by our model, but then would be paid out tax-free to the shareholder. We actually moderately raise the taxation in this segment but do not to create reasons for the needless misalignment of the business environment – a basic income is to be financed only by appreciable amount only if the taxation base is not destroyed.

In addition, our draft plans to raise the normal rate of the sales tax ("value added tax") to 20% (the reduced rate would stay the same, on this occasion). The motivation here is not so much to raise addition income but an even tax rate which makes it easier to calculate, in particular, for the small businessman. Besides, it can be thought of as abolishing the reduced tax rates and to return the gains to the citizens with a higher basic income. For the treasury and the average consumer such a measure would be a zero sum game, however, would clearly simplify the calculation and raising of the sales tax. Nevertheless, such a measure is not a component of this draft.


The future of the social welfare

We want to continue the pension scheme and unemployment insurance as an equally financed social security and move the health insurance and long term care insurance onto a tax-financed health system. The contributions to the pension scheme and unemployment insurance should amount to 20% , 17% for the pension scheme and 3% for the unemployment insurance. To such an extent, in which by the basic income the unemployment insurance turns out as over dimensional, the pension scheme should be redeployed by the unemployed.

The equally financed pension scheme that was set up for over 100 years is a dependable old-age pension and has lasted through two world wars. We do not want to give up this socio-political achievement without need, but complement it with the basic income. The unemployment insurance cushions the first results of an unemployment and provides proven instruments for the labour market policy (bad weather money, short-time worker's money, bankruptcy failure money). We want to put the achievements of the federal labour department in the light of a basic income on the test bench and adapt it to changed circumstances. Besides, we calculate that a some of the instruments will turn out to be unneeded, so that contribution shares can be redeployed by the unemployed in the pension scheme where they can be sensibly used against the background of the demographic developments.

Today the social welfare system is under pressure because of the demographic development: With the decrease of employment social-welfare insurance payers and their contributions are curtailed. Therefore, our model intends to tax incomes which so not attract a compulsory social insurance tax (business profits, taxes on capital income, employee's remunerations above the income threshold), with a so-called solidarity fee. Thereby would employment that is liable to social insurance made more attractive in comparison to employment that is not liable and so the social security system stabilized.

By changing the health insurance and long term care insurance to a tax-financed system the employer's contributions to the social security would sink massively and with it the extra associated costs which brings relief to employers in particular labour-intensive companies. This is, however, no “ present to the employers ”: Low income employees and in particular those with families are less susceptible to blackmail by employers to lower wages or conditions and besides, we have by the discontinuation of the sanctions when unemployment benefit is not accompanied by work seeking activity.


Defects

In this draft some point are not resolved yet to our own satisfaction. It because of our understanding of transparency that we bring these points up.

The basic income is not finance-able to an amount which we hold for completely existence-protecting. It would be conceivable that, e.g., by property taxation, eco taxes, land value tax or financial transaction taxes additional elbow room could be created. Also we hope that a prospering economy would lead to a rise in the basic income or the,in this draft, too carefully accepted values are too low. And that these lead to a higher basic income allowing for the housing subsidy to be lower.

With the housing subsidy we cannot get past the concept of group benefit needs yet. A draft without regard to group benefit needs would tear open a hole in the budget of considerable size.– provided that we don't want to put low earners in a worse position as the current lowest social welfare level. Nevertheless, we could already take children and youth of these out the group benefit needs, because we can pay a basic income of an existence-protecting amount to these.

Ende

Andrew

Most of the details went over my head, but I like the elegance of the basic idea. There's a lot of unfairness and complexity with the borderlines between tax brackets, benefits, and in-work payments, and with the distinction between main job and secondary job tax codes. Where there's this kind of unfairness, there could be economic consequences too. If doing more work might shift someone from one bracket, benefit, or in-work payment to another, giving little additional money in the hand, there is little incentive to do that work. And plus it pisses people off. This suggestion solves all these issues, at least in theory. I think one downside of the approach of taking money away and then giving it back, though, could be that it might provide a greater incentive for tax evasion.

BTW, the book Tax By Design: The Mirrlees Review might be relevant here (I don't know, 'cause I haven't read it, but the authors credentials look impressive).

This is a starting point but for me the principle of an unconditional basic income has many advantages:
Most benefits would no longer be needed - unemployment, sickness, superannuation, maternal/ paternal leave
It would mean more people would be able to start their own businesses or become self employed as they have the basic income to fall back on should things go wrong.
There will be some free loading but it will be compensated for by the lowering in crimes of theft.

I would prefer that a portion or all of the money that is used to pay for the basic income comes from the use of common goods like minerals, fishing rights, use of land and waterways by commercial entities. There is a lot of value outside the Treaty of Waitangi and the way that common goods are being sold off for a pittance is just wrong.

The other thing I don't like is people being taxed on what they earn I would prefer that people pay a tax on what they spend over the period of a year i.e. earnings - savings = expenditure. It would also be progressive so that those that spend a lot pay a lot of tax. But the choice is theirs.

Agree with a lot of what you say, but I really don't think a UMI will have any serious effect on theft.

Also, progressive tax systems are redundant with a UMI. You don't need to give lower tax rates for lower income/use, because the tax is being paid with free money so they can afford it anyway. Only questions left are what the highest (and only) tax rate should be, and what level the UMI is set to. (to be equivalent to the current benefits AND the current tax rate discount at the low end (i.e. progressiveness))

This is a fairly interesting idea which I think I've linked to before; http://www.bigkahuna.org.nz/

I think we really need to expand our membership a lot though, before we make any big decisions about tax policy.

I don't see how you are going to attract members if you are not going to talk about things that interest them. You don't have to form policy. Here we often make a "Meingungsbild" which is a hard concept to translate but it means opinion picture and is a sort of multi-dimensional opinion spectrum. It is not decisive but shows what people are thinking about a topic that is not black and white- here is a URL to a 4 dimensional political map http://www.politicalcompass.org/uselection2012

PPDE was known as a one theme party - net politics and in the doldrums for a long while until people realised we had not only more to say but that they could have a part in deciding what was being said.

Leave policy for later sure but offer people a platform where they can get involved. Statements like the Pirate Party of New Zealand has no official policy on X but our members' opinions range from A to Z might be one way to get some interest going.

Look at the FB group - a post starting with a painful to read "I know PPNZ's range of policies should be kept narrow and focussed, but perhaps expanding into education to make one or two limited points about that could be a good thing?" has, up to now 70 comments.

Andrew

A progressive income tax would be redundant but a progressive consumption tax would have other benefits. It would lower the value of the top echelon of status bestowing possessions and thus the whole gamut of conspicuous consumption.

Andrew

If you tax people based on what they earn, then that is fairer than taxing them on what they spend.
For example if a person earns $26k and spends $25k per year, and a person earns $52k and spends $25k per year, then they would both be taxed the same if you were to base taxation on earnings alone.
This would be a highly regressive tax system.

Why not set a flat tax at 100% and have the state provide everything, comrades?

It's just money shuffling. A progressive tax-rate is supposed to redistribute from the top end back to the bottom. A flat tax system where the bottom gets subsided and pays less tax than the top is exactly the same thing that will have the same problem.
In NZ we get the best of both worlds where we tax the high earners more and pay subsidies such as Working For Families and Accommodation Supplement. Which, if not done right, leads to situations such as affordable rental prices being subsidied by the government using money they collect from the landlords who earn more because of subsidised rental prices...
If we had a base income that allowed you all the time in the world, coupled with a flat tax of 45%, where's the incentive to do anything? If you started a small business that earned as much as your base income, you have increased your net income by roughly one third for all your effort. You'd have to triple that effort to double your net income. The difference between the haves and the have-nots will perpetually increase and the difference between the two won't be down to living a clean life and working hard...just like any other similar system.

It doesn't matter how you wrangle, the issue is ensuring distribution is fair and that involves a society working together. And if that could work we wouldn't need tax, or have any use for money.

The reason I would like a progressive consumption tax is to reduce excessive consumption which is something that humanity and the planet cannot afford.

If you want fairness then you have to start from a point of equality of access to available resources, not the canard of "equality of opportunity" as a lottery would satisfy that condition but not be really fair.

Also as far as income goes - I would happily tax income from rent seeking activities, if any were permitted.