Affordability gap between rich and poor
By Michael Vaillancourt on 24 September 2009 - 7:29am
New CCPA report shows the need for more wealth redistribution and a Guaranteed Annual Income.
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GAI, how would it work
GAI, how would it work exactly?
I'm not familiar with how a GAI implementation would actually look like. Are there documents dealing with this specifically as it relates to how the GPC might implement it?
The main idea behind GAI
The main idea behind GAI historically is that it is cheaper to replace the complex and bureaucratic patchwork of income support programs with a GAI. GAI also removes current work disincentives found in existing welfare programs. This cost-savings aspect (while improving economic security universally) is covered in detail in Brian Steensland's latest book (2008), which dissects the GAI debates in the U.S. throughout the 1960s and 70s. It is why those on the right have approved of it, including Senator Hugh Segal and Reginald Stackhouse for example, while also seeing the freedom and fairness aspects of the policy. Here is a good article Stackhouse wrote on the topic recently: An Income for All Canadians http://www.thestar.com/comment/article/304074
Alaska's Permanent Dividend Fund is sometimes looked to as one aspect or form of GAI. With a green carbon tax and focus on sustainability that greens bring to the debate the Alaska model can be modified to improve resource management while providing a more generous GAI/dividend. The initiator of the Alaska Dividend envisioned it paying out 4-8 times what it currently does to every Alaskan. Health cost savings are also an important feature of the introduction of GAI, as poverty carries a large financial and health cost to Canadian society, not to mention social cost.
Not surprisingly, I have a
Not surprisingly, I have a problem with GAI. Not so much with the idea, but rather the basis that adopting it will necessarily accomplish something good.
GAI seems to involve a similar patchwork of rules to what we currently have, but it would be implemented in a centralized way. That could be more efficient, but it could still lead to a large bureaucracy. The details are what makes or breaks GAI. A government can't afford GAI if the benefits are so generous that too many people feel they can simply not work. On the flip-side, the point of GAI is lost if the benefits are so inadequate that people can be left in poverty. Adequacy and means tests have plenty of factors to account for.
Also, does it mean safety nets like minimum wage are no longer required? If a person is not economically obligated to work, then the ethical requirement to regulate wages or general working conditions to prevent abuse is not necessary.
Anyway, the efficiency of the GAI process is not correlated to how generous people are willing to make the system. The devil is in the details. GAI on its own is just a method.
Is this a correct assessment? And if so, what are the details we are proposing?
Milton Friedman first
Milton Friedman first suggested a GAI, but his idea was to replace almost all other forms of social assistance with negative taxation.
The original idea behind the social credit party was an interesting implementation of it as well based on a redistributive credit being evenly distributed. (It would have required government to have its own banking system.)
Last time around we introduced the concept, but we didn't fully push it. Without a constitutional agreement, the federal government would not be able to encroach on areas of provincial jurisdiction.
I believe its a novel and needed idea, but the devil is in the details. For instance, in Vancouver, where housing supply is almost nil, a GAI couldn't on its own provide everyone with an affordable housing, as the stock wouldn't be there, and an increase in income supplements would just drive the cost of living up higher.
Probably a better way to do things is to work at providing a comprehensive safety net. Build affordable and sustainable housing, with an aim to build some of them outside of existing urban centers to decentralize the economy. Used refundable tax credits to companies who hire students and require all individuals seeking income assistance to be taking skill or training.
Ultimately, one of the challenges will be is to encourage smaller lifestyles, as we cannot keep growing infinitely.
With a few exceptions, (maternity leave, seniors, disabled) the GAI would only work if someone is willing to put in some effort back into society. (IE, attending school, or working some sort of job.)
The one think I would like to
The one think I would like to see if the return of a "super high" bracket of taxation or a millionaire's tax. IE, a high level bracket for those making over 10,000,000 a year.
It would work best if synchronized with the US. Before Reagan came into power in 1980, the top income tax bracket was actually 75%. (I think it applied to those making equivalent of $50,000,000 a year.)
I think high corporate taxes hurt the average investor, and I don't think we should discourage success, but really, their becomes a point where some people have more than they would ever possibly spend, and as such by earning such an income, they are inevitably removing money from the economy.
One more thing
I have to say, though, I can't really stand ideologies caught up on the "gap" between the rich and the poor. Focus on bringing the floor up, not the ceiling down.
Inequality factor of 100?
I don't think that the gap
I don't think that the gap between the rich and poor is the same discussion about helping the poor. We can probably afford to feed, clothe and house everyone in Canada and still have plenty of money left over for a huge wealth gap. The problem with giving stuff out for free is that people stop contributing, so then you have to implement a means test, and people will scam the means test, so you have to make it more rigorous, and then some people fall through the cracks, etc., etc. GAI is certainly a more organized model, but it's still only a general notion, and hence the cost/benefit depends on the implementation. So if we want to cheer GAI, we should define a model, or at least some aspects of it.
Regarding the wealth gap, I always wondered why tax brackets weren't determined by wealth distribution. The exact numbers aren't relevant here, but I don't know why brackets can't be based off mathematical formulae. Tax levels should be set based on the distribution of wealth for the prior year. The bigger the gap, the higher the tax brackets move. If there is more equity, then the tax brackets move lower. Setting tax brackets and tax rates shouldn't be arbitrary, nor should they be set at the whim of a politician.
GAI and wealth distribution
The GAI ought to be a human right, based on an individual right to a share of our common resources. I don't share your concern about whether people are considered to be "contributing" (contributing to what?). Remember we need to reduce CO2 emissions. We don't need everyone working for the sake of working. What people do with their time is a personal choice, and if this gives people the ability to fulfill their real interests and passions, then society will be the better for it. At the moment, I'm homeschooling my three kids and my annual income is zero. Am I "contributing"? If not it is quite ironic, since I spend way more time and effort than most people trying to improve our lot.
Your idea about income taxes sounds intriguing. Would it require a target inequality factor like Daly talks about?
The right to share common
The right to share common resources is probably one of the most misunderstood concepts.
I am certainly on board to share equally all non-adjunctive revenues the government receives. These would be revenues not collected for a specific purpose, and would include revenues acquired: (a) as part of resource rationing (like auctioning of licenses); or (b) as part of recompense for use of the commons (like resource royalties and prospecting rights.)
Unfortunately, these non-adjunctive revenues would not be sufficient to meet the demands of GAI as I believe you understand the term. So then the question is where does this additional money come from? This money is not just floating around.
Whether or not you believe raising your children is contributing to society, it does not pay the bills. If GAI encouraged everyone to stay home and perform non-economic tasks for years and years on end, the country would simply go bankrupt. And the fact that this may make you unhappy is not relevant, because it is simply a fact: the provisioning of GAI would be impossible regardless of the right that you think you have to it.
There is a confusion among many leftists here that the provision of goods is a human right. Food, shelter, clothing, and health-care don't just appear out of thin air. (Well food does, but for large populations it needs to be farmed, so it's not a labour-free resource.) All of these things that you consider to be human rights involve labour to produce. In order for them to be human rights the way you understand that term, others are obligated to work for you. You are therefore saying that you have a human right to make others work for you even though you have no duty to contribute in kind. I guess your claim was that you do contribute but only transiently; and that when and what you do or do not contribute is apparently your privilege to decide and assess. I have a problem with unilateral determination of what contributions are sufficient to offset societal assistance.
The human right is the equal opportunity to acquire primary needs, not the free provisioning of these needs.
Formulaic Tax Brackets
In order for formulaic tax brackets to be helpful, the formula must inherently account for wealth distribution.
I'd imagine a bracketing system that creates 2 static brackets, bracket 1 would have no tax rate, and bracket 2 would cover the difference up to the bottom 50% of earned income. The tax rate for the second bracket would be some rate determined by some fairness function.
This covers the bottom 50% of earned income. Subsequence brackets would operate off some formula like maybe each bracket covers the next remaining half of income distribution; the income cutoff for the k'th bracket would be 100%/2^(k-1), which would give the series: 25%, 12.5%, 6.25% 3.125%, 1.5625%, etc. So if the cutoff is 25%, then it would be taxable on income where 25% of the population earns at least that income amount. This automatically takes into account income distribution.
The tax rates should increase equivalently using some uniform geometric function. Think of it as how much you can keep. If you can keep 75% of your money for the 3rd bracket, (25% tax rate), then the next bracket you should be able to keep 75% * (n-1)/n. Let's say n (the geometric factor) is 10, so the next bracket means you keep 67.5% (a tax rate of 32.5%). You can have a maximum rate cap and squish the range of that function, but anyway, if implemented properly, it would take into account the severity of distribution sparsity.
The exact function can be anything, but my suggestion above is chosen because it can accomodate any number of brackets and can be easily applied to normal statistical functions. An economist would have to look at how to choose the relative tax rates, the number of brackets and the geometric factor, but once chosen, it would be devoid of political interference and could be automatically recomputed each year.