Tax within the context of philanthropic giving
Universal basic income (UBI) has recently made the headlines in Germany, certainly fuelled by the basic income referendum in Switzerland in 2016 and the ongoing UBI experiment in Finland.
The unconditional payment has been defended by a surprisingly diverse coalition of people, including politicians from right as well as left parties, CEOs of multinationals and philanthropists. There is already a crowd-funding initiative, called “My basic income”, which finances a basic income lottery distributing year-long payments of 1000 € per month1 . However, opponents can be found among trade unions and the same parties that defend the UBI.
At first view, the concept of an unconditional income is as simple as its name suggests: every member of society receives a guaranteed income independent of their employment, family or other social conditions, and no equivalent is asked in return. Despite the cross-partisan support for the concept, does a real pro-UBI coalition exist in Germany? It is an unlikely concept, given the diverse ideological backgrounds of its proponents and the different concepts that are encompassed under the same label.
Support for UBI
UBI is hailed by its supporters as a solution for many of Germany’s current social challenges, such as:
- Increasing digitalisation and automation linked to the fear that the economy will not create adequate and sufficient employment for those made redundant by machines.
- The perception by a large part of the population that social inequality has increased or is too high.
- A dissatisfaction by parts of the political left with the social assistance system put in place under social-democrat leadership, known as Hartz IV. Its combination of work-incentives and sanctions is criticised as not preventing poverty among certain groups e.g. long-term unemployed and children, and as impeding meaningful social participation.
Criticisms of UBI
There are numerous controversies surrounding UBI, however. For example, will a UBI only compensate those who lose out to technological change or will it enable other people? Will it re-distribute wealth and income or not? Will people continue working? What impact will it have on the low-wage sector? How will it be financed and what impact will it have on inflation and wages? Which social security payments can it replace? Is it fair to pay an income without asking anything in return? Can it be reconciled with labour mobility in the EU?
Models of UBI
Not even the supporters of UBI agree on all these issues. There is no common understanding on the objectives, the ultimate design and the social model behind UBI. Broadly speaking, three schools of thought can be distinguished in the German debate2 .
The first, which is sometimes called ‘humanistic UBI’ supports the idea of a UBI as it liberates people from paid work. This allows them to pursue activities of their choice and releases much creative and entrepreneurial potential, while guaranteeing the basic right for social participation and dignity. Re-distribution is not an explicit aim in this reasoning3 and the financing would come from a consumer tax. A long-standing advocate of such a concept is Götz Werner, founder of one of Germany’s largest drugstore chains.
The second variant of UBI and furthest to the left of the political spectrum aims at redistribution and advocates a monthly payment of more than 1000 €, additional to those existing welfare payments which are financed by employer and employee contributions . The UBI is seen as a lever for a radical transformation of society and would be accompanied by major social and economic reforms. The preferred model of the German left is a UBI as a direct payment to individuals. But financing a UBI in the form of a negative income tax – where individuals with higher incomes would see their UBI-payments gradually decrease to zero – is also considered. In both cases, the necessary additional funds for a UBI would come from income and capital taxes, as well as other public funds.
The third, liberal variant, proposed recently by Thomas Straubhaar5 , is designed as a direct cash payment replacing all other social payments, except health insurance. It would be financed by a tax on production activities.
Other basic income concepts advanced by liberal thinkers take the form of negative income taxes or citizen-money6 . Sometimes these may be means-tested and thus not unconditional, but mostly they would replace all existing social transfers and always be cost-neutral for public finances.
Political and popular support for the introduction of UBI
The leftmost party represented in parliament, Die Linke, is divided over the UBI. Only fringe parties such as the Pirate Party and a recently founded mono-thematic party called the UBI Alliance have included the UBI in their manifestos, often without specifying the design. In 2013, the federal parliament declined a petition to debate the introduction of UBI7 . However, its scientific research service has confirmed that the introduction of UBI would be compatible with the German constitution, which contains no obligation for citizens to work. But it might require an amendment to the constitution in order to grant the relevant competences to the federal level8.
Surveys undertaken in Germany on the eve of the Swiss referendum in spring 2016 showed a majority of respondents in favour of UBI – the share of supporters having increased in comparison to the same question asked in 20159 . This increasing support might be explained by a desire for alternative social policies rectifying the above-mentioned ills. But it might also be explained by the stillexisting vagueness of the concept and an insufficient knowledge about its implications. An informed public debate allowing for the understanding of different objectives, designs and implications of UBI is therefore necessary to help people form a reliable opinion.
Andrea Nahles, social-democrat minister of labour and social affairs, does not believe that there is any need for a fundamental change of the welfare system and advocates a personal activity account as an alternative to any UBI10.
Even some of UBI’s proponents are sceptical as to whether it will ever be implemented in Germany, but they see it as a useful concept to push the debate forwards on in-depth reforms of the welfare state. Currently, however, UBI looks unlikely to become a prominent topic in the campaign for the parliamentary elections in September 2017.