Basic income in Australia: an exploration

Abstract

Purpose – Basic income (BI) is predicted to be the major economic intervention in response to raising income inequality and accelerating technological progress. Financing is often the first question that arises when discussing a BI. A thorough answer to this question will determine the sustainability of any BI program. However, BI experiments implemented worldwide have not answered this question. This paper explores two options for a BI program in Australia: (1) BI and (2) top-up basic income (TBI). Design/methodology/approach – The authors employ “back-of-the-envelope” calculations with the latest publicly available data on income distribution, the poverty line and the share of income tax in the government revenue to estimate the costs of implementing BI in Australia. Findings – Even without any change in the current tax regulations, the TBI option, which requires a contribution of 2–3% disposable income from net contributors, will guarantee that no Australian family lives under the current national poverty line. The BI for all options is not financially feasible under the current tax and transfer regulations because it requires an additional tax rate of at least 42% of disposable income from net contributors. Practical implications – The results of this study can serve as inputs for the design and implementation of BI options in Australia and similar countries. Originality/value – This is the first paper that examines the macroeconomic effects of BI options in Australia.

Keywords

• Basic income
• Effective marginal tax rate
• Clawback
• Macroeconomic effects