Basic income (BI) is one of the most revolutionary and innovative proposals currently available to end poverty, redistribute wealth and build a fairer and more equitable society. It has been much talked about in recent years, especially since the Covid-19 pandemic we suffered in 2020. It is a proposal that has been gaining support and which will be a means to overcome the current framework of conditional aid. The system has created mechanisms to perpetuate the poverty trap, and the BR is there to overcome it. Subsidies conditional on situations of poverty discourage paid work, and individuals and families are immersed in a spiral of lack of resources and no capacity to save. The BR goes beyond subsidies conditional on situations of poverty, which can be contextual, and which stigmatise because their achievement is linked to this situation; subsidies which, moreover, usually have insufficient amounts and must be combined with a series of complementary aids, always linked to a context of poverty and social exclusion. These subsidies also have very high administrative costs, as there is a bureaucratic machinery that decides who should receive them and selects and controls them. BR overcomes all this framework and creates conditions for a freer and more egalitarian society.
By Carme Porta
Faced with the growing inequalities in the society in which we live, the Fundació Josep Irla, together with the Coppieters Foundation, has published a study on the possible European funding of BR as an important part of advancing social justice in Europe. The study is based on the need to internationalise the BR: in a globalised world and economy, the obligation to structure redistribution proposals that go beyond current state borders is increasingly evident.
The study on the possible financing of a European BR has been carried out by economists Daniel Raventós, Lluís Torrens and Jordi Arcarons and aims to answer a key question: can a European Union BR be financed? The response is yes, and different proposals for amounts and sources of funding are put forward. The three economists argue that BR is perfectly fundable at the European level, basically through three taxes: a reform of personal income tax, a wealth tax, and a carbon dioxide tax. The authors stress that they base their proposal on these taxes for reasons of simplification, given that they are a reliable and recurrent source of financing, and are difficult to circumvent. Basing financing on these taxes is a blatant reference to property rights, since by regulating and distributing property differently, another level of taxation can technically be established and distributed. Political will may or may not make this change possible. Large fortunes and huge inequalities are a problem for the freedom of the majority of the population. The European BR is a proposal that would make it possible to guarantee the existence of the entire population of Europe. Thus, the study addresses one of the most important objections to the development of BR: the need to design fair and inequality-reducing financing for the EU as a whole, and argues that a tax on large fortunes is absolutely necessary – and possible.
The BR model that the study will be proposing is individual, unconditional and universal. BR replaces any other monetary benefit from the state as long as it is lower than the proposed amount. Moreover, the BR is not taxed and a moratorium of three years’ residence is foreseen in order to be able to receive it.
The study will consider different models for its financing based on the parameters of justice, equity and redistribution. Four different scenarios have been chosen that develop different possibilities. At the methodological level, data from the European Union Statistics on Income and Living Conditions for 2020, provided by Eurostat, have been used. These data were used to analyse the income distribution and the situation of inequality, poverty and social exclusion of EU households in the 26 EU Member States, with the exception of Lithuania, where the data cannot be validated with the rest of the EU.
The reference poverty line has been defined as 60% of the median net income of each household divided among its members – 40% in the case of severe poverty. This is central to the financing model. The basic income model on which the study is based is universal and therefore individual, which is why it is important to have disaggregated personal data on taxes and social contributions. The four different scenarios designed determine cash transfer proposals: what BR is received and how.
The first scenario is the one preferred by the authors of the study. The amount is transferred according to the characteristics of the household; as the BR is individual, the amount is divided by all persons in the household. Therefore, it is an individualised income that applies the at-risk-of-poverty threshold of each household when calculating the amount.
In the second scenario, a purely individual basic income is designed. The cash transfer is given according to household members, and variations are proposed for single-parent and single-person households: 95% of the at-risk-of-poverty threshold is granted to adults in these households, 70% to the rest and 30% to minors.
A third scenario also applies pure individuality as the previous one; it differs in the fact that it lowers the calculation to 70% for adults in households that are not single-person or single-parent households.
And the last scenario of the study follows similar criteria, but sets the severe poverty threshold for single-person households and gives 50% to minors.
As noted above, the financing of these possible scenarios is based on three taxes. The main one would be personal income tax. A large part of the financing of the BR would come from this tax. A wealth tax and a carbon dioxide tax would complement the financing. The wealth tax is necessary to ensure greater equality and benefits for the poor, who make up the majority of the population. On the other hand, the carbon dioxide tax would be fully in line with the idea of environmental taxes and the measures envisaged in the Sustainable Development Goals (SDGs) agenda.
The ethical-political justification for the proposal presented by the authors lies in the conception of justice and freedom inherent to democratic republicanism. Republican freedom is based on the guarantee of material existence; the BR would allow the majority of the population to escape poverty, and therefore domination, although not all of the population would benefit from it, as the wealth tax demonstrates. A BR would therefore give freedom to the entire population.
This proposal for a European basic income is innovative and courageous; and it is, above all, a fair proposal that opens up opportunities for the majority of the population, and that points to new ways to end inequalities.
Carme Porta is a member of the Basic Income Network and the SURT Foundation.