Feature

Does Universal Basic Income Have a Home in Taiwan?

Basic Income Is an Investment in Taiwan’s Most Valuable Asset

2020/12/21 ,

Opinion

Tyler Prochazka

Photo Credit: Wiki Commons

Tyler Prochazka

Tyler Prochazka is on the Board of Directors of UBI Taiwan. He is currently an MA Student in Asia Pacific Studies, National Chengchi University.

What you need to know

Basic income is an investment in Taiwan’s most critical and valuable resource: its people.

Basic income frees people from the work they dislike, allowing them to engage with their passion and contribute the most they can to society.

With the power of money, the rich disproportionately influence the direction of the government. Basic income shifts the power dynamics by providing an unconditional and permanent fund for recipients to advocate for the cause they believe in.

With basic income, passionate activists, who do not have to worry about basic needs, will be able to sustain and expand their activism, and common people will choose to engage in politics and help build a stronger democracy.

Providing an unconditional income makes a great impact on a person’s ability to take control of their future. It encourages them to say no to poor working conditions and, more importantly, to say yes to their preferred choice for life.

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Photo Credit: Reuters / TPG Images
Demonstrators holding sunflowers shout slogans in front of the Presidential Office in Taipei, March 30, 2014. Thousands of demonstrators marched the streets to protest against the controversial trade pact with China.

Basic income allows lower income families to secure the resources that lay the foundation for growth and productivity, such as educational opportunities.

For many young people, it could be the difference between taking a job at a convenience store or taking a risk to start a business. The effect of basic income is to encourage people to take risks and liberate them from having to do something they dislike.

At UBI Taiwan, instead of universal basic income, we propose a basic income that phases out as a person’s income increases, or that high income earners partially or entirely pay back to the program in tax. The goal is to entitle all, including those who are unable to earn a living, to meet their basic needs.

Basic income helps low-income consumers

Economically speaking, basic income gives more market power to low-income consumers. A new group of consumers will be able to afford more goods and services, and businesses will try to get into the new target market by understanding and meeting their needs.

UBI Taiwan estimates that a basic income of NT$10,000 a month will redistribute approximately NT$550 billion (US$19 billion) from wealthy taxpayers to low and middle income families every year. The market will inevitably respond to a substantial change in market demand by shifting production to fulfill their preferences.

If Taiwan’s one-time Triple Stimulus Voucher program has helped its Covid-19-hit economy pick up, with companies launching massive sales campaigns to encourage consumption, imagine how hard they will try to promote their products to low-income consumers if the government provides more than three times the stimulus amount each month.

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Photo Credit: CNA
A person shows the stimulus vouchers she received at a post office in Taipei, Taiwan, July 15, 2020.

In Taiwan, with wages stagnating for years, low-income families have been taking a hard hit and the competition in the sector of the consumer goods they prefer is declining. Only a massive redistribution of wealth to these families can change the status quo.

Redistribution usually leads to lower prices and more competition in the market. For example, the U.S. Supplemental Nutrition Assistance Program, a program that enables low-income people to buy nutritious food by issuing food stamps, opened the door for more businesses to enter the food market to get the slice of the pie. U.S. states with a higher take-up rate for food stamps have lower food prices and enjoy a wider variety of food, research from the London School of Economics shows.

Common concerns over basic income in Taiwan

While many worry that basic income causes massive inflation, a study in Mexico reveals that cash transfers work better or at least as well as in-kind benefits.

Following most mainstream proposals for basic income, Basic Income Taiwan does not advocate for monetary easing, meaning that Taiwan will not risk causing inflation even if the government implements such a program.

However, basic income is unlikely to cause inflation in Taiwan because of its high level of integration with the global economy. It is the global supply, not the domestic demand, that determines the prices for imported goods.

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Photo Credit: Reuters / TPG Images
A customer buys Santa Claus decorations in a shop in Taipei, Taiwan, November 26, 2020.

Some are concerned that a basic income program leads to a rise in rental and housing prices, but they should focus on existing factors that have kept housing prices high for years instead. To solve this problem, the government should raise the tax on unoccupied properties and on speculative buying, fund public housing, and encourage development outside of urban areas.

Basic income encourages young people to move out of the city and start businesses elsewhere with lower rental costs. With more money at their disposal, they would help revitalize non-urban areas across Taiwan.

A sustainable basic income is possible in Taiwan

We design the system that applies to us, and there is no reason why the system must force us to start out with nothing when we are born.

The current system gives unfair advantages to high-income families who can pass down their wealth for generations and provide more opportunities to their children. There are untold numbers of talented Taiwanese people who cannot realize their potential because they cannot afford to pursue their passion.

Launching basic income in Taiwan is possible if carefully designed. This is the case because partial basic income programs already exist around the world. In Alaska, residents have been receiving US$1,000 to US$2,000 every year in dividends from the state government for decades. Iran converted its oil subsidy program into a basic income program that gave its citizens an equivalent of US$16,000 a year without harming employment.

For Taiwan, a sustainable basic income is feasible, but the government needs to take the following actions to launch the program.

First, Taiwan needs to collect more tax revenue by imposing carbon tax on polluting businesses or luxury tax on goods accessible primarily to high-income earners. It is also possible to raise existing taxes like pollution tax, estate tax, property tax, and financial transaction tax.

With one of the lowest tax rates in the world, Taiwan can afford to raise taxes when doing so does not risk economic competitiveness.

Also, Taiwan should stop subsidizing the fossil-fuel industry. The subsidies to Taipower, Taiwan’s state-owned power company, worth NT$36.4 billion in 2019, could have been distributed directly to low-income families in cash.

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Photo Credit: Reuters / TPG Images
A visitor looks out at Taiwan's Fourth Nuclear Power Plant in May, 2012.

UBI Taiwan proposes a basic income of NT$10,000 to every citizen above 20-years-old and NT$5,000 to every citizen 20 and younger, which accounts for around 3.2% of Taiwan’s GDP; the calculation takes into account a tax clawback. The plan’s impact on Taiwan’s financial position is little, given that the government neither needs to raise tax rates significantly nor run up debts for it.

More than 70% of Taiwanese families would receive a guaranteed income every month and poverty would be virtually eliminated. The wealthiest families would be phased out of basic income by paying a greater share in taxes. Phasing out basic income for high-income individuals keeps the net cost to a feasible sum.

High-income earners could receive basic income, but pay back some or all of it at the end of the year based on how much they earn in that year. The key is that the burden is placed on high-income earners and not low-income earners.

As basic income lifts many out of poverty, the government will naturally spend less and less on social welfare because these families would no longer need the other assistance. But all of Taiwan’s existing welfare programs could be kept in place during a transition period for anyone who needs additional financial aid.

During the transition period, the government can evaluate how specific programs provide necessary benefits that basic income cannot, such as benefits for people with disabilities. Reforms to health insurance should be discussed separately.

Taiwan does not gain its economic strength from low taxes, which benefit the rich. Implementing basic income will give Taiwan a much greater advantage than low taxes can.

If low taxes were the main draw for businesses, Silicon Valley and New York would not have attracted so many. Investors are looking for talented and passionate people, and basic income cultivates these kinds of people by providing an opportunity for everyone to thrive.

Basic income finances Taiwan’s most critical and valuable resource: its people.

TNL Editor: Bryan Chou, Nicholas Haggerty (@thenewslensintl)

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Does Universal Basic Income Have a Home in Taiwan? :

The cash stimulus payments issued by many governments during the Covid-19 pandemic have given new life to calls for a universal basic income (UBI) — unconditional, sustained cash payments. Does UBI have a home in Taiwan? Since Taiwan has avoided calamity from Covid-19, major stimulus wasn’t seen as necessary. But economic stability could be all the more reason to think big about addressing social inequality. Here we evaluate the possibility of launching a UBI program in Taiwan.

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