About

The impact of a Basic Income on crime rates can vary significantly between countries, depending on the local economy, existing welfare programs, the size of the Basic Income payment, and the type of crime. Research often differentiates between results in low-income versus high-income countries.

• Namibia (Otjivero Pilot): After the introduction of a monthly grant, overall crime rates reported to local police fell by 42%.
  • Stock theft decreased by 43%.
  • Other types of theft dropped by nearly 20%.
• Kenya, GiveDirectly and Innovations for Poverty Action (IPA).
  • Reduction in Domestic Violence: One of the most striking results was a 51% decrease in intimate partner violence. This is attributed to reduced household financial stress and improved psychological well-being.

In countries such as New Zealand, unemployment benefits (Jobseeker Support) are means-tested and have very high abatement rates. This results in Effective Marginal Tax Rates (EMTRs) exceeding 100% when all abatements are considered. With high EMTRs, paid work may result in reduced net income.

In such situations, the high abatement rates and EMTRs, coupled with a punitive monitoring regime, can leave some people with little or no income – a strong driver of crimes of necessity. Shifting to a Basic Income reduces crime.

With a taxable Basic Income, people with low and high incomes are paid the same gross Basic Income amount, but with a progressive tax, those with lower incomes receive a greater net amount after tax is deducted. This provides Broad Targeting of the Basic Income to those on lower incomes while lowering the net cost (the amount the government pays) of the scheme.

—

A taxable Basic Income with a progressive tax system, which pays a dollar in net value to someone with no other income, will pay less than a dollar in net value to someone with a high income.

• Consequently, a scheme with a taxable Basic Income will have a total net cost that is less than a tax-free Basic Income, which delivers a net dollar to everyone equally, regardless of other income.
• The lower overall cost of a taxable Basic Income scheme makes it easier for a government to implement a Basic Income scheme.

To achieve a realistic Basic Income, the payments must be realistic, will replace existing welfare payments wherever possible, and be broadly targeted to those on low incomes.

Minimising the initial cost makes it easier to introduce a comprehensive Basic Income Scheme.

• The recommended net value of a realistic Basic Income is between 20% and 30% of GDP per capita.
  See: How big will a Basic Income be?
  • Basic Income payments greater than 30% of GDP per capita may distort existing relativities and be too expensive to easily implement.
  • Basic Income payments of less than 20% of GDP per capita may be too small to make a useful difference.
• A Basic Income will replace all welfare payments of equal or less value and partially replace larger payments.
  See: Cost and Funding a Basic Income, Will a Basic Income replace Welfare?
  • A person with special needs who currently receives welfare payments greater than the proposed Basic Income will receive the Basic Income plus a payment to bring their net income up to the existing level.
• The initial cost of a Basic Income can be further reduced by using taxation to Broadly Target the payments to those with the lowest incomes.
  See: 2. Use a taxable Basic Income and Broad Targeting.
  • With Broad Targeting, all recipients receive the same gross Basic Income payment, but those with higher incomes will have the Basic Income taxed at a higher marginal tax rate and consequently receive a lower net payment.

Minimising the initial or up-front costs this way makes it easier to introduce and fund a Basic Income.

.

A realistic Basic Income is broadly targeted to those on low incomes.

• The best use of money is achieved with a taxable Basic Income, giving Broad Targeting of the Basic Income to those with the lowest incomes.
  See: Targeting and Taxation
• Broad targeting allows those with the lowest incomes to receive the greatest possible Basic Income in net value.

Using a taxable Basic Income combined with a suitable progressive tax scheme allows Broad Targeting of a Basic Income to those on the lowest incomes. This reduces the overall cost of the scheme while maximising the benefit received by those with lower incomes.

.

If a Basic Income is paid as a taxable amount, the actual payments that a government makes and an individual receives are the net amount, after tax is deducted.

• The net payments, after tax is deducted, are a better indicator of the immediate cost of a Basic Income.
• A cost calculated by multiplying the gross (before tax) amount of the Basic Income by the number of recipients is a false cost, usually only quoted by people intending to deceive.

When a Basic Income scheme is in place, most people will have other sources of income and pay tax on that income, or pay tax on their total income with the Basic Income included. As a consequence:

• People with high incomes may pay more in tax than they receive from the Basic Income. They are net payers.
• People with low incomes may receive more from a Basic Income than they pay in tax. They are net recipients.
• The total amount paid by the government, after the tax received is deducted, to all net recipients is the transfer cost, the amount that must be raised from net payers to pay net recipients.
• The transfer cost is lower than both the gross cost and the net cost and is a better indicator of the true cost.

With income tax, income earners pay a portion of their income to the government in return for services provided. With a Basic Income, the government pays individuals.

• A Basic Income might be considered a negative tax payment. It is paid by the government to citizens, and this lowers their Effective Tax Rate (ETR).
• A Basic Income can be considered a form of negative income tax, reducing overall tax rates or ETR.
• If the total money paid out by the government as a Basic Income equals the extra tax raised by the government to pay the Basic Income, the net cost to the government is zero.

When the circulation of money is considered, the real cost of an ongoing Basic Income Scheme may be considered to be the money that must be found to fund the scheme from elsewhere.

The circulation of money.

• When a taxable Basic Income is paid out and spent by the recipients, a portion of the money will be returned to the government in income taxes by the recipients, and a further amount will be returned as GST on the goods and services that they purchase.
• The money not returned to the government immediately continues to circulate. As the money circulates, a similar portion is returned with each circulation. Eventually, after multiple circulations, almost all the money from any one payment is returned to the government as taxes.
• Once a scheme is up and running, the total money returned each period rises to almost the same level as the total amount being paid out for that period.
• Because most of the money paid out with a well-designed Basic Income scheme will circulate and return to the government over time as taxes, the ongoing real cost of a good scheme is minimal.
• By minimising the initial gross expenditure and considering the net cost of a Basic Income, while accounting for the multiplier effect (see 4. below), and return of funds as taxes, the real cost of a Basic Income is found to be considerably less than the figure obtained by multiplying the gross payment by the number of recipients.

A cost determined by multiplying the gross cost per person by the number of recipients is a false and grossly misleading cost, only used by those with little or no understanding of reality.

The Multiplier Effect boosts government revenues.
People on lower incomes need to spend money on essentials like food and housing, so they tend to spend money quickly. In contrast, those with higher incomes tend to accumulate money and spend it slowly.

• Those on lower incomes have a higher Marginal Propensity to Consume (MPC).
• Those with a higher MPC spend their money quickly, which boosts the velocity of money in their local area.
• When a Basic Income is paid to all and Broadly Targeted to those on lower Incomes with a suitable tax regime, the velocity of money rises both locally and nationally.
  • The largest increases in the velocity of money occur in low-income areas where the marginal propensity to consume is highest.
• Because governments, using taxes such as income tax and GST, tax money as it moves, the faster money moves, the greater the government tax revenue will be.
• When the velocity of money rises, there is an increase in the multiplier effect, the factor by which GDP rises when compared with an initial injection of money. Just as the velocity of money rises both locally and nationally, increases in the multiplier effect occur both locally and nationally. This has been observed with Basic Income trials.
• Increases in GDP due to the Multiplier Effect increase government tax revenues, which can be used to fund the Basic Income.
• Realising that increases in government revenue are a result of the initial Basic Income expenditure enables the real cost of a Basic Income to be more accurately determined.
• See AI perspectives – The impact of Basic Income on the Velocity of Money, the Multiplier Effect, and Wellbeing.
  .