Michael Woods
Question:19 Dr. Woods asked the Minister for Social Welfare his views on the recently published CORI study entitled Pathways to a Basic Income; and if he will make a statement on the matter. [9918/97]
Written Answers. - Basic Income Study.
The study in question presents a detailed implementation plan for a basic income scheme, along the lines previously proposed by CORI. The study is a welcome addition to the growing volume of research on the topic of basic income in Ireland.
I will clarify what basic income means. It would be a payment, made by the State, to all citizens, regardless of other income, family circumstances or labour force status. Two main forms of basic income can exist: a full basic income would be high enough to replace all existing social welfare payments, while a partial basic income would be paid at a lower rate, and would thus require retention of part of the social welfare system for those with no other income. The idea of basic income is not a new one; many such schemes have been discussed in the past in both academic and political circles. However, the evidence to date for Ireland has suggested that the tax rates needed to fund such a scheme would make it extremely expensive. This new study states that the growth in the economy in recent years, and the consequent growth in the tax base, means that the tax rates needed to fund the BI scheme now appear to be somewhat lower than previous studies have indicated. While obviously the figures underlying this will need to be examined carefully, the topic of basic income clearly merits further consideration. The current National Programme Partnership 2000 contains a commitment to carry out a further independent appraisal of the concept of, and full implications of, introducing a basic income payment, taking account of the work of the ESRI, CORI and the expert working group on the integration of tax and social welfare, as well as international research. This latest report from CORI will be an important input into that study.
The new study puts forward a number of basic income options, with different basic income rates and different tax implications. All of these raise a number of issues which would have to be clarified further.
First, the implications for some people on low incomes would need to be examined carefully. The ESRI research on basic income, and the expert working group on tax-social welfare integration both identified people on low incomes who would lose out under basic income. Examples would be some lone parents, some pensioners, and people on social welfare schemes which allow them to combine income from social welfare with income from employment — for example, the back-to-work allowance. While CORI indicate that they would not intend these groups to lose out, the report does not give details of how this would be done.
Second, the proposals involve substantial increases in marginal tax rates for most taxpayers. While CORI argue that there are individuals in the current system who face even higher tax-benefit withdrawal rates — for example, people in receipt of family income supplement who pay tax — the fact is that relatively small numbers of people are currently in this situation. By contrast, in the basic income scheme, everyone with income apart from the BI itself would pay a marginal tax rate of between 44 per cent and 50 per cent on all such income. Such high marginal tax rates could discourage participation in the paid labour force and could have an effect on the black economy.
A third problem with basic income relates to migration. There could be a tendency for people who have opted out of the market economy in other countries to choose to live in Ireland, to claim BI. At the same time, young highly educated single people, with high earnings potential, would find that the tax rates in Ireland compared unfavourably with those abroad. Given that one of the elements of our current economic boom has been foreign companies who are attracted here by our highly educated young workforce, this could have adverse economic, as well as social effects.
I look forward to seeing all these issues discussed and analysed further, particularly in the context of the overall appraisal of the scheme promised in the programme.