Taxing Questions

Let’s look at how the UK can pay for UBI in the future. Any stats quoted are from UK government sources, or quoted as such by various publications/reports. Some figures are obviously guesstimates – even official figures. The UK migration figures are a very good example of this, as they are collated via an International Passenger Survey, applied at major UK air, rail and seaports, so they do not accurately portray actual migration. There are similar problems with unemployment, long-term sickness figures, or average wages/rents/costs of living by UK region etc.

Those who wish to pull apart this post based on rubbishing the statistics should bear this in mind: You need a stronger argument against UBI than simply maths, because nobody knows the exact sums involved. That said, we have to do some cost/benefit analysis, so let’s get on with it.

UK Tax Take vs Harsh Future Reality

In the previous two posts we looked at the ever-increasing impact of Artificial Intelligence (AI) and automation on the global jobs market, plus the need to incorporate UBI as a building block in a type of Roosevelt style New Deal. In a world where work isn’t necessary to your survival, we all have to re-think how we value ourselves and others.

What we do, is no longer who we are. That is our collective future.

Now, we already have a UK Benefits budget of around £270billion, or about 35% of all UK government spending. By far the biggest chunk of welfare spending goes on pensions and schemes like Pension Credit. This will inevitably rise in future, as we keep on living longer. Here’s another stat worth noting from the Office of Budget Responsibility; at £182bn Income Tax raises 25% of all government spending. This is set to shrink, as AI and robots begin to cull jobs, so there will be a shortfall in that source of revenue.

There’s another crucial nugget of data; £126bn is raised by NI contributions. That’s about 20% of the government’s total tax take. So it means that the relatively low paid, are bearing a much bigger burden than those high earners on 50K and more, as the NI slice of the typical salary slip is far lower than Income Tax, taken as an overall percentage of deductions from wages. So, as AI decimates jobs, the Income Tax and NI take – from both employees and employers, will fall, rapidly. That is a huge drop in revenue.

These harsh financial facts of modern life link back to the point made in blog post two, regarding the Victorian idea of `deserving vs undeserving poor’ having any relevance to the debate on Universal Basic Income (UBI). The system is already skewed towards taxing the `working poor’ at a higher rate in overall percentage terms, than any contribution demanded from wealthy individuals, or global companies, busily playing Catch-Me-If-You-Can on the carousel of tax avoidance.

In short, if you cannot radically alter the existing methods of primarily raising tax from those who work, then you have no hope of funding UBI. Once the jobs are gone, so too is a huge chunk of revenue.

The Rich Cannot Hide From This

Over the last 30 years or so, all governments of developed economies have agreed tax avoidance schemes so that high net worth (HNW) individuals and large companies, can dodge tax. The rich are not paying their fair share towards roads, schools, hospitals, pensions and everything else modern societies need to function. It’s hard to believe now that George Harrison wrote a protest song about paying 98% income tax.

Yes, that level of income tax actually happened in 1960s Britain – you couldn’t dodge it – and yet John Lennon still bought a mansion in Berkshire and a Bentley on his 2%. So the idea that the wealthy cannot afford to pay more tax is stupid and patronising – they did so in the past, and if they want to survive on their private islands, they will in future.

The reason the rich must contribute is that UBI must also be funded by general taxation on goods and services, to replace the lost tax take from NI and Income Tax. The poor cannot be expected to foot the UBI bill on their own, or the result will be civil unrest, riots, looting and so on.

A UBI Funding Strategy

In blog post one we established that the jobs shrinkage has begun, certain sectors of our working lives will be hit harder than others and that AI and automation will become more commonplace, with the deployment of AI in particular offering the greatest challenge to humanity since the Industrial Revolution. Losing our `job title’ identity will be a defining moment in history.

So, assuming there should be a strategy for deploying UBI across the UK, what is the timetable likely to look like, and how will we pay for it?

Here are some core ideas and target areas:

AI Levy replaces Employers National Insurance

Companies stand to gain hugely from firing humans and replacing them with machines and software. Those who do so, should pay the same amount in AI Levy, as they would in Employers NI. This should be applied very soon, as the jobs cull has already begun.
Phased-in Job Sharing Across Public Sector

As the number of full-time jobs overall decreases, it is unfair and unreasonable to allow public sector workers to maintain a higher paid income, than those thrown on the scrapheap by large companies. Where AI software replaces admin staff job sharing should become the de facto norm, from around 2022 onwards, backed up by legislation. Also, we need a `blind’ recruitment, no CVs policy too. This is essential to prevent a `chumocracy’ factor, where existing senior managers effectively ring-fence the remaining highly paid public sector jobs in a cosy cartel.

Protection of Jobs That Require a Human Touch

Many healthcare, teaching, counselling, criminal justice etc. roles obviously benefit from the human touch. Even if AI, or robots can replace humans, we should think about `reserved’ occupations, which should be protected by law from automation. There is a greater imperative than simply saving money via AI, and this needs to be recognised. Reserved jobs will still be subject to job sharing however and this, to an extent, will offer part-time employment to those left redundant from sectors like manufacturing, distribution, insurance, finance, admin etc.

Increasing Tax Take on Consumption

There’s no point in fighting to dismantle capitalism, it won’t go away. But everyone should accept that extra taxes on goods and services are necessary to pay for UBI, which should be deployed in `rolling phases’ over no more than five years. As UBI is increased to around the £750pm level, taxation also rises.

Food, heat and shelter – the basics necessary to survive – must NOT be taxed. The whole point of UBI is to give everyone that chance to live, just above the poverty line, in a two-income household. Or receive the cash and work part-time, if they choose to live alone.
Products that should be taxed higher include; alcohol, tobacco, vehicles, electronic gadgets, land & property, long distance travel and luxury brands.

Estimated Revenue and Savings

In 2016 just 2% of all total tax receipts came from alcohol. This was 4% back in 1980 and although people – especially men – probably drink less than they did in the 80s, the revenue percentage target should be 4% again. Supermarket booze in particular needs to be aligned to the retail costs seen in pubs, clubs and High Street gin shops.

Estimated extra alcohol tax raised: £10.7 billion

Tobacco tax has also halved from 4% to 2% over the last 35 years or so and again, it needs to rise to help pay for UBI. Nobody needs tobacco to live. E-cigs/liquids need to be taxed too, but at a lower level.

Estimated extra tobacco tax raised: £10 billion

We abolish VED vehicle tax and add on another 10p per litre in fuel tax. Ending VED and replacing it with a simple, online, automated vehicle ownership document, which costs say £20-£50 per year would reduce the overall VED tax take slightly, but shift the burden of tax onto those who drive the most miles, in cars with the biggest engines. As UBI means LESS commuting, more job-sharing and more people simply not working, few will object to a 10p fuel duty rise, with an 0.5% VAT rise on that extra fuel tax, as we do not have to drive to work every day.

Estimated extra fuel/vehicle tax raised: £5 billion

Air Passenger Duty to double, to around £140 per long haul flight, via an Escalator Scheme. This would begin in 2020 and the higher rate would apply from 2025.

Estimated extra revenue raised: £2 billion

Cancel Trident nuclear submarine programme. Who are we planning a nuclear war against? Some of the Trident savings would be better invested in a small fleet of fast, coastal patrol boats, but a large annual overall saving can be made by shutting down this 1960s willy-waving exercise.

Estimated tax revenue raised: £1 billion

New empty property/undeveloped land tax, levied per square metre. This would free up housing space, plus tax overseas investors who are simply sitting on land and investments, waiting to cash in when the local demand is high.

Estimated tax raised: £2 billion

A new gambling transaction tax of 15% across the board; levied at source, via betting shops, race courses, online – everything. The time is right for radical reform of the piecemeal gambling tax system. Large companies are dodging the tax by laundering profits offshore, so a simple 15% tax at the point of play, collected automatically by AI software would be a much easier system to administrate and tax revenues would soar. Those companies who choose to HQ offshore pay a 10% tax levy, based on estimated turnover, not profits. This would a clear incentive to HQ in UK and pay Corporation Tax on profits instead, thus creating UK jobs.

Estimated extra gambling tax revenue raised: £1 billion

Luxury Goods and Online Transaction Tax

Global brands have successfully transferred the burden of paying tax onto consumers during the last 20-30 years. Large companies such as ebay, Amazon, Apple, Google and many more have also raised billions in the UK, without paying more than a token 1%-3% of those profits back, in the form of Corporation Tax.

To fund UBI, schools, roads, hospitals and more, a simple 5% online Transaction Tax will help to level the playing field and force big companies to make a contribution. Again, as with the Gambling sector, those companies who HQ for tax purposes within the UK will be EXEMPT from paying the Transaction Tax.

Additionally, a special Luxury Goods Tax, (LGT) is a useful way of generating UBI income from the wealthy, as they spend their cash on cars/boats/second homes etc. Cars costing over 50K will have a 15% LGT applied, likewise boats, caravans, wristwatches, second/holiday homes, fine art, jewellery, clothing etc. costing above 50K would attract the same LGT levy.

Estimated Luxury Tax raised: £1.2 billion

A Final But Crucial Note On Public Spending Savings

One thing to note about AI’s application – and the introduction of UBI – is that it will inevitably cut public sector spending, by a huge amount, as the headcount reduces. Plus the equipment, office space, heating, electricity, insurance costs, pensions contributions etc. will also be cut from public sector departments.

The savings are potentially immense. Sectors like the NHS, education admin, courts, tax gathering and many other departments will all be able to introduce job sharing, and a rolling programme of many thousands of job losses would be inevitable. Just streamlining our ridiculously complex and judgemental benefits system, will result in thousands of jobs being cut, plus the massive savings in desk space, rents, utilities, maintenance, paperclips – every damn thing.

It won’t be an easy sell. People dislike losing the security of a public sector job. But it must happen, and this is because those in the private sector will feel the chill wind of AI much sooner.

It’s difficult to estimate actual savings, as governments and other agencies are notoriously good as spending any savings on grandiose/political pet projects as soon as they have the cash. But let’s assume a jobs cull of around 10,000-12,000 positions per year from about 2025 onwards, across the UK.

Total savings per year from AI deployment in public sector: £10billion-£12 billion

Conclusion

OK then, we have a potential £45 billion to invest in UBI from around 2025 onwards. It sounds a great deal, but it isn’t. If you assume a unilateral payment to every working age adult, (aged 17-65) it equates to just £500 per month or so, for everyone. You can’t live on that, but it would allow you to get by, with part-time work, in the same way that women with children get by under the existing Tax Credits system. Once UBI is introduced it will be easier to get public support for more revenue-raising schemes to boost the citizen income to around £750pm.

The great thing about UBI is that it will not be means tested, so all those dads pretending to live at their mums/brothers/nans place, can actually front up and say they’re living with their partners and their children. Better still, one – or both – of those adults can find part-time work, so everyone can afford a holiday, run a car, or start a micro business from home perhaps? The point is that a small subsidy per month offers a great boost in percentage terms at the lowest end of the economic scale. Because the poor don’t have savings, property or other assets, they won’t save the money, it will be spent and re-circulate within the economy.

UBI for the majority of people offers hope, a chance of betterment and the freedom to choose how to spend the majority of your waking hours. It is a financially viable, and moral alternative to the kind of slavery that globalist corporations would sentence us too, once the machines have taken away everything human from the workplace.

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