Universal Basic Income in New Zealand Would Require Tax Overhaul

March 29, 2016 Taxation in New Zealand

WELLINGTON – New research indicates that the proposal to implement a Universal basic Income in New Zealand is not practical, unless the government slashes its spending or overhauls the current tax system.

In a statement released on March 29th the New Zealand activist group the Taxpayers’ Union claimed that it is not possible to implement a Universal basic Income in New Zealand unless the country also enacts a flat rate tax on personal incomes.

The idea of implementing a Universal Basic Income (UBI) is currently under discussion in New Zealand, after the opposition Labour Party floated the concept earlier this month.

The Taxpayers’ Union claims that in order for a UBI to not lead to income decreases for welfare and superannuation recipients, the rate would need to be set at NZD 15 thousand per person per year.

In order to fund such payments the government would either need to significantly cut spending or completely transform the income tax system from progressive tax rates to a flat tax of between 50.6 percent and 55.7 percent.

Further, the Union noted that an alternative proposal for UBI to be set at NZD 11 thousand has also been floated, but even the reduced payments would still cost NZD 10 billion per year more than the current welfare system, but would result in some beneficiaries seeing their weekly payments reduced by NZD 150.

In its statement the Taxpayers’ Union concluded that a UBI is unlikely to benefit New Zealand, as the system would require significant funding, but would leave the most financially vulnerable taxpayers no better off than they are under the current system.

Photo by Wisconsin Historical Images