Commission on Taxation and Welfare findings on Basic Income Fundamentally Flawed
Social Justice Ireland has challenged the Commission on Taxation and Welfare’s recommendation to reject Universal Basic Income. The analysis underpinning this recommendation, contains serious errors of fact and logic. There are three factual errors contained in the Commission’s report. These concern the tax rate required to fund Basic Income, its cost and its impact on poverty and income distribution. These mistakes alone render the Commission’s conclusions fundamentally flawed.
Concerning the first factual error: The only figure noted by the Commission for the required tax rate was 65% which comes from a study done by the ESRI in 1994. The Commission ignored that the ESRI subsequently reduced this figure to 51.6%. That, in turn was rejected by the Department of Finance who concluded that a tax rate of 47.6% would be required. The Department of Finance’s conclusion was accepted by the Steering Group which authored the Government’s Green Paper on Basic Income.
Given these facts, the figure of 65 percent, which is the only figure reported in the recent Commission report, is inappropriate, misleading and erroneous.
The second error of fact concerns the cost of Basic Income. The Commission claims that transitioning to a Basic Income system would be very costly – from both a social welfare and tax perspective. The Commission’s report failed to recognise that all costings by experts including SJI have been made on the basis of Exchequer neutrality.
The third error of fact concerns the Commission’s claim “that the income distribution effect of the proposal did not benefit many low-income households”. This failed to acknowledge the Government’s Green Paper conclusion that: “70% of households in the bottom four deciles would gain from Basic Income, while 16% would lose compared with conventional options.” In other words, the Commission offered no evidence to contradict the Green Paper’s conclusion that most low-income households would gain from a Universal Basic Income scheme.
There are also errors of logic. For example, the Commission report fails to acknowledge that, based on international trials of basic income, it would appear that both the proposed Basic Income system and the current tax/welfare system deliver the same participation in the paid labour force, only Basic Income delivers improved well-being. This gives the proposed reform a key advantage which is inexplicably ignored.”
The second error of logic can be seen when the Commission claims that a perfect experiment (pilot programme) is required to assess the merits of Basic Income. They then go on to state that no such experiment should be undertaken. At the same time they fail to explain why such an experiment is required. How many significant policy initiatives in Ireland have followed a perfect experiment?
To summarise:
The Report of the Commission on Taxation and Welfare 2022 came to its conclusion based on
- Three serious factual errors
- Plus, A failure to draw (provisional) logical conclusion on pilots (i.e. that UBI appears to be superior)
- Plus, A declaration that we cannot assess UBI till a perfect experiment is conducted (which is untrue)
- Plus, a recommendation, lacking any evidential basis, that we don’t do a perfect experiment.
Consequently, Social Justice Ireland rejects the Commission’s recommendation not to support the development of a Universal Basic Income in Ireland. That conclusion should be rejected because the evidence and the logic on which it is based is erroneous, misleading and inappropriate. We call on the Commission, on the Oireachtas Committee on Budgetary Oversight, and on the Commission’s parent Department of Finance, to ensure these grave errors are corrected.
Social Justice Ireland appeared before the Oireachtas Committee on Budgetary Oversight to discuss the examination of chapters 9, 10, 11, 12 of the Commission on Taxation and Welfare Report available to watch Here.