Universal Basic Income is not a complete give-away


By Chris Kuan

The Universal Basic Income (UBI). I am sure there are plenty of naysayers in Singapore - our government definitely, while countries like Finland and Canada are willing to experiment with new, even radical ideas to future-proof not only their economies but also their societies from profound economic changes.

Most of the naysayers ignore or are ignorant of one crucial aspect of the UBI especially when they railed against the rise in the fiscal burdens of governments leading to huge rises in tax.

The thing is that the UBI is not a complete give-away.

First, the UBI is to replace much if not all of the social entitlements given by the state to its citizens. That means a lot, if not most of the social expenditures will be replaced by expenditures on the UBI.

Second, because the UBI replaces such a large swath of social spending, its simplicity eliminates a huge portion of the costs than went into administering the myriad social benefit programs, constituting significant savings to the state. So an increase in taxes because of the implementation of the UBI, isn't so obvious as the naysayers would have it.

But alas, there lies the problem for Singapore in future-proofing our society from the consequences of profound economic changes. For Singapore, a UBI is a slam dunk proposition to vastly increase the fiscal burden on the government. That is because the government spends little in providing social entitlements to Singaporeans.

As a result, the UBI does not replace much social spending because there isn't that much spending in the first place. The UBI will therefore lead to an increase in taxes, especially for the top quintiles who, as in my RCC post yesterday, enjoyed huge advantages in the present tax and spend regime which favours relatively low taxes on the wealthy and nearly no taxes on capital income at the expense of providing citizens with more comprehensive social entitlements.

The fear is that not only the government but most citizens cannot escape the mental straitjacket of the fiscal policies of low taxes, low social expenditures and reserves accumulation of the last 50 years. That makes us ill prepared to future proof our societies and meet the challenges of profound economic changes. Those fiscal policies need to be changed - gradually if we start today but if we stick our heads in the sand, wrenchingly in the future.