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There is one subtle difference between basic income and welfare systems, which is that welfare systems (even if you remove the requirement to look for work) pla
by JesperRavn 11y ago
There is one subtle difference between basic income and welfare systems, which is that welfare systems (even if you remove the requirement to look for work) place a higher effective marginal tax rate on the lower end of the income scale. This might seem like a bad idea, since it reduces the incentive to work for those people. E.g. in Australia, at some levels of income, you lose $5 of welfare for every $10 you earn, making the effective marginal tax rate 50%. However, every redistribution system reduces the incentive to work for some people. Basic income (plus progressive income tax) would make this disincentive gradually increase with wealth. Welfare systems have a high marginal tax rate up to the point where people no longer receive welfare, then the marginal tax rate drops sharply, and gradually increases with progressive income tax.
When viewed in this holistic way, it's not clear which system is better. Some might say that it's not worth "wasting" incentive to work on people who might, for all number of reasons, not be willing or able to work anyway. This is the argument for the welfare state. On the other hand, basic income advocates might argue that poor people are just as willing to work as anyone, and that creating very high effective marginal tax rates for them results in welfare dependence.