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You want the poor to have more money? Well, doh! Splash the cash
It's really not that taxing
Universal basic income
So, while tax and redistribution is the correct answer, at least to me, perhaps not exactly this system of it. So, for the past decade now I've been arguing that the income tax (and NI) system should only apply to income above the full year, full time, minimum wage.
Lower marginal tax rates for the poor, tick. The post tax income of the current minimum wage would be the post tax income of that living wage under the current tax system, tick. And it obeys simple and basic logic. If you want the poor to have more money then stop taxing them so bloody much, tick.
This is also an argument that I seem to have won, at least as far as income tax goes. And I can even trace how the idea went from myself howling in the wilderness at the Adam Smith Institute to being in the Tory, Ukip and Lib Dem manifestos and even now being enacted, roughly, by Osborne.
This is though, only an interim stage. We still have this problem of distorting incentives through marginal benefit withdrawal and tax rates being too high. And there's also that partial subsidy to low-wage employers of in work benefits.
And we'd really rather get all of our subsidisation of the poor over onto the other side, to where it's working to raise the reservation wage.
The answer to all of that being a universal basic income. Just give everyone, every adult, £X a year, untaxed and untaxable, and be done with all the rest of it. The sort of amount that is possible, given the current wealth of the country, is very definitely basic. Costings have been done for something like £130 a week, the current pension guarantee and it could be done. It is a universal income, yes, but it is basic.
This is not because there is (not for me at least) some moral duty that the poor get other peoples' money. Nor that there's a societal duty to share the wealth. Rather, there's going to be a welfare system of some kind.
So, let's have the least bad one we can. Which means, as Charles Murray calcuated for the US, $10,000 to each and every adult each year, or as the UK could just about afford, some £6,500.
Because we're going to have a system of redistribution come what may so let's have one that creates as few distortions as we can. Which means don't mess with the markets but tax and redistribute. And why not just redistribute to all and then let everyone get on with it all? ®
*Yes, yes, Sveriges Riksbank or summat, not a real Nobel.