Universal allowance/Basic income.

A universal allowance is a benefit that is paid to all New Zealander's - retirees, low income earners, high income earners, invalids, unemployed, students, solo parents, and replaces existing benefits (unemployment benefit, DPB*, pension, sickness benefit, working for families, student allowance).

There are no requirements, all New Zealand citizens (18 and up*) are entitled to receive it.

The rate would be about the same as the existing unemployment benefit (around $200-250/wk pp).

When people work, the money they earn, is earned on top of the universal allowance. The tax rate is hiked to cover the benefit paid to everyone.

Gareth Morgan advocates such a system, with a flat tax afterward.

http://www.bigkahuna.org.nz/universal-basic-income.aspx

Addressing the immediate objections:

• How do we afford this?

We increase income tax, which doesn't affect workers, because they're now getting an extra basic income. For example, if currently you are a worker earning $500/wk being taxed 20%, so your take home is $400.

In this system, a worker might earn $200 basic income, and $500 a week taxed at 60%, so their take home pay is the same.

Assuming that everybody who currently is working, still works, then theoretically it's possible to implement this system without any change to the basic tax burden/benefits of people. (That's a drastic simplification, but the idea is the same).

• People will just stop working and live on the benefit, if they're not subject to having to look for a job.

No they won't. People are still better off working. Some people might. For example, they might use it as an opportunity to try a business venture, or become an artist, knowing that they won't starve if it fails. Other people, are already gaming the benefit/sickness benefit system.

Advantages of such a system:

• Reduce the cost of administering social welfare. Because beneficiaries are no longer subject to eligibility criteria, the bureaucracy associated with administering WINZ is drastically reduced. The payment becomes an automatic thing through IRD.

• Reduce the hypocrisy of social welfare. Social welfare currently is riddled with incentivising dishonesty. For example people finding sympathetic doctors to sign sickness certificates, or lying about having a partner as to maximise their benefit.

• Allow workers freedom of movement. Workers can take a chance moving someone where to look for work, knowing that they won't starve.

• Allow economic innovation. Entrepreneurs can try their hand at business, knowing they won't starve if it fails.

Pensions:

This would reduce pensions to current unemployment benefit levels. I think this is reasonable.

*DPB: This is a bug bear of this system. Personally, I'm in favour of removing the DPB. I think the DPB allows people to have children in irresponsible circumstances, by making being a parent being a full time paying job, that one can't be fired from.

The (hard) system I propose, individual adults are still entitled to basic income. Children are not entitled to an income, until they are 18. Perhaps working for families can still exist, to help lower wage earners. To look after a child, parents need to either have a job, or pay for it out of their basic income. This shifts the responsibility for having a child on the parent, and hopefully disuades them from having children if they can't afford it. If people are struggling looking after children on basic income, they can get support from their family and community and charity.

Ofcourse, DPB shouldn't be cut off straight away, it should be phased out.

I'm aware that this is quite hard position, so if you think the idea otherwise have merits, then let me know what you think on this point.

Other issues to discuss:

The tax burden. Gareth Morgan advocates a flat tax on top of the basic income, but I think that's a bit unfair on lower wage earners. I still advocate a progressive tax system. Unless you had another scheme like a subsidised house buying scheme to help lower wage earners.