Social Security and Taxation

Dear Dr Henry

I write in relation to the reviews of the Australian social security system and taxation system. My submission is in the form of a proposal to construct the social security system in a way which would improve equity and remove inefficiencies.

Essentially, I am proposing that:

• the main income support system is paid by Taxation, as was the case between 1910 and 1927.
• the main income support is in the form of a universal Basic Income paid to each
  individual permanent resident; it is paid irrespective of marital or other social status, irrespective of income or wealth, and irrespective of whether the individual works or not; and would have no conditions attached other than the need to establish permanent residence.
• Ideally, no distinction would be made in the rate of payment on the basis of age (but I do accept that in the short term, in order to garner widespread acceptance, a lower rate might be needed for children living in the family home). A Basic Income along such lines will promote egalitarian solidarity but would not on its own ensure equity, some residual services and payments will be required to be provided by Federal and state governments and by non–government not for profit agencies in order to deal with issues of disability, illness, child and other care responsibilities.The rate of payment would have to be slightly above the single age pension rate if some poorer people are not to lose in the changeover. Thus, under a Basic income many poor people currently discriminated against, by the existing social security system, will be lifted out of poverty.The rate of taxation required in the short term would be in the order of 43-47% and would be payable on the first through to the last dollar earned (the Irish Government has done a lot of work in this regard see their September 2002 Green Paper entitled Basic Income).

  Because each individual receives the equivalent of the age pension the net rate of taxation on earned income would be slightly less than under the existing system for all workers earning up to the average male weekly earning (two thirds of all workers); those earning more than the average wage would pay slightly more tax and those on high incomes significantly more.

  Those who currently receive superannuation do not pay tax and this system could continue – but if they wished to receive the Basic Income, they would have to pay the full rate of tax on their superannuation. It would, however, be simpler to treat superannuation as income and pay everyone the Basic Income.

I am attaching my latest paper “Individual rights, collective rights and Basic Income” which looks at some of these issues but there is a vast body of literature on the subject of Basic Income which can be found on the Basic Income Guarantee Australia website: http://www.basicincome.qut.edu.au/index.jsp

Of particular relevance to the current Australia inquiries is my e-Book: Income Insecurity: The Basic Income Alternative
http://www.basicincome.qut.edu.au/interest/e-books.jsp

Basic Income Guarantee Australia is a national affiliate of the Basic Income Earth Network On whose web site a huge array of academic papers can be accessed. http://www.basicincome.org/bien/

The Basic Income debate is intensifying in many parts of Europe, Latin America, Southern Africa and Canada. The last time there was as much international interest in the income maintenance debate Australia (through the Henderson Poverty Inquiry and Treasury’s Priority Review Staff) made a significant contribution. It would be a pity if we sleep through this revival in interest in Basic Income throughout much of the world.

Yours sincerely

Inquiries into Social Security and Taxation 2008 http://taxreview.treasury.gov.au/content/submissions/pre_14_november_2008/Tomlinson_J ohn.pdf