Tax rate of 60% could fund €50bn universal basic income, says ESRI 

'Any UBI policy would likely involve significant changes to the tax and benefit system,' the report said, suggesting that  “financing a UBI through income tax could require a high tax rate, in the order of 50% or 60%'. Picture: PA

A high tax rate of 60% could be required to fund a universal basic income (UBI) scheme costing up to €50bn in Ireland, a new report has found.

A UBI refers to an unconditional payment that is made regularly, is sufficient to live on, is not means tested, and carries no work requirements. 

The adoption of a UBI here would involve “significant changes” to the tax and benefits system, help reduce poverty, and improve wellbeing.

The Economic and Social Research Institute (ESRI) has reviewed international evidence on UBI, with the aim of informing the rollout of such a scheme here.

It modelled four UBI scenarios, considering an income of €1,200 per month, €1,000 per month, €208 per week and a fixed €10bn scenario.

The first and most costly scenario of €14,387 per year would set the exchequer back by just under €50bn if distributed to the 3.4m potential earners registered in the 2016 census — for comparison, social welfare cost the State €20.9bn in 2019. This scenario grants earners 60% of median income, the threshold level to be at risk of poverty.

The second scenario of €1,000 per month would cost the exchequer €41bn.

A third would set it at the social welfare rate of €208 per week, or €10,816 annually, to cost €37bn. 

However, the report quotes a Green Party statement from 2019 criticising this scenario, and suggesting it should be above social welfare rates to “represent a fair redistribution of national income to achieve lower levels of poverty”.

The fourth scenario of a €10bn cap on payments would amount to €243 per month or €2,920 per year if shared among the same number of earners in 2016.

While the first three scenarios “resemble a true UBI”, the fourth does not, and has a significantly lower cost, the report said. The first two are considered to be “high cost”, however, the third “has received criticism as being too low”.

“Any UBI policy would likely involve significant changes to the tax and benefit system,” the report said, and suggested that “financing a UBI through income tax could require a high tax rate, in the order of 50% or 60%”.

The ESRI did not advocate for a specific scenario and said “considerable discretion” will be required by policymakers in the shape of a pilot scheme.

The report suggested UBI could replace some or all existing social welfare payments, and a universal and unconditional payment could reduce administrative costs associated with means testing.

The report outlined the pros and cons of trialling UBI on a country-wide basis or in a particular town, and it will be up to Government policymakers to enact a pilot study.