Sir, Thank you for your excellent coverage (April 8th) of the recent Conference of Religious of Ireland report "Pathways to a Basic Income". However, there are some points which require clarification.
The CORI proposal involves a weekly guaranteed payment of £70 a week to all adults aged 21 to 64. A previous study allowed for a universal payment of £60 a week and a means tested top up of £10. However my recent study shows it would now be possible to make a universal payment of £70 a week to all in this category.
The suggestion that 60 per cent of taxpayers face a marginal rate of 26 per cent is incorrect. This figure includes those on marginal relief who can face the marginal relief rate of 40 per cent. This figures also ignores PRSI (4.5 per cent) and employment levies (2.25 per cent). It does not factor in the withdrawal rate of the family income supplement. This often results in poverty traps and de facto marginal tax rates of over 100%. Additionally since the basic income is not taxed, there is no situation where there is a tax rate of 50 per cent on all income, or the actual 48 per cent that CORI proposes. A flat tax also reduces tax evasion and avoidance by creating a more transparent system, as well as eliminating just about all social welfare fraud.
The study is dedicated to comparing tax cutting options with the strategies for introducing baste income payments. Like is compared with like at all times and no extra revenue is assumed to make basic income look more attractive than tax cuts. All figures are based on, revenue commissioners' estimates. The revenue buoyancy which the study uses is guaranteed, in the sense that it is the amount of the current revenue buoyancy that is already committed by the social partners to tax cuts in Partnership 2000.
The study states, if we compare the average household net income for each income decile for the current situation with what would exist after full implementation of the CORI proposal, only the top decile has a net reduction in weekly income, a £6.94 decline out of a weekly income of £763.45. This is hardly significant.
My views on the need for a minimum wage need to be clarified. My earlier study "Basic Income and the Irish Worker" (with Catherine Kavanagh) discusses this issue in depth and concludes "given that wage subsidisation is not expected, establishing a minimum wage is not a necessary condition for the implementation of a Basic Income" in Ireland (in "An Adequate Income Guarantee for All, 1995, page 108). Yours, etc.,
Professor CHARLES
Co-author: Pathways to a
Basic Income.
Department of Economics
St. John's University,
New York, USA.