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 Bring Back Truly Progressive Taxation and Eliminate Poverty with BIFT: Basic Income and Flat Tax
Richard Parncutt 1985-2025

BIFT stands for Basic Income and Flat Tax -- specifically, universal unconditional basic income and flat income tax. BIFT is a promising approach to tax and welfare that could solve a long series of social, political, and economic problems. But BIFT is often misunderstood -- perhaps because most people are so attached to a traditional right- or left-wing perspective. Which of the following are you?
 Left-wingers reading this may feel that BIFT is not left enough and reject it. By the same token, many right-wingers will fear some new kind of socialism sneaking in by the back door and respond similarly negatively. Both such responses are inappropriate. BIFT itself is neither left of right. Instead, governments, voters, and economists will be free to make BIFT as left or as right as they want. They will do that by adjusting two numbers: BI, the rate of basic income for most people, and FT, the flat rate of income tax.

Before continuing, please consider adopting a centrist perspective -- neither left nor right -- and asking yourself this question: Given that there are often good arguments on both the left and the right, what kind of public economic system would be best for society as a whole?

Contents

How BIFT Works
Understanding the graph
Initial estimates of BI and FT
Special cases
Implicit progressivity
Flat tax? Really?
Financing BI
Transparency and democracy
Democratic determination of BI and FT rates
The end of tax deductions
The end of cash
Why BIFT is good
The transition to BIFT		 Why we need BIFT
A vision for a better world
Myths about BI
The need for left-wing economic theory
The art of political compromise
Making capitalism sustainable
Ending slavery and the working poor
Ending poverty
Promoting equity
Realising human rights
Redistributing wealth

Literature
The author
How BIFT works

As the gap between rich and poor widens, a growing number of people are struggling with unemployment, precarity, or insufficient income to pay for essentials. That's not only bad for people -- it's also bad for the economy, which relies on consumers with money to spend.

BIFT is a promising solution. But many have never heard of it. It is not being seriously discussed, let alone introduced. Many immediately reject the idea and keep surfing. Here are some impulsive responses:
 In all three cases, the opposite is the case. 
 The three points can be understood by looking at a simple example. Imagine this scenario. You are unemployed and dependent on a BI of €1000 per month. Hopefully more, but the round figure is easy to work with.
Understanding the graph

In modern capitalist democracies, people "earn" money, the amount depending on work and ability. Exceptionally, people receive benefits if they are somehow desperate, for example if they are unemployed despite reasonable attempts to find work.

BIFT would change the way we think about income. It would change the reasons and justifications for earning or receiving money. It would do that by combining unemployment benefit and income tax into a single package. You would not necessarily have to "earn" money or need to be "desperate" to receive it. Instead, everyone would be entitled to both fulfilment of basic needs and reward for work.

The line on the above graph basically says this:
 The  graph illustrates three important features of BIFT, at a glance.
 BIFT is an inseparable combination of BI and FT. BI cannot be changed without changing FT and vice-versa. It can be misleading to consider BI alone, or FT alone. The line on the graph shows the combined effect of BI and FT. That is all that matters. As Frank Sinatra crooned: "Love and marriage go together like a horse and carriage".
The diagonal line is a proposal for the relationship between gross income and net income for individuals. These two terms are defined as follows:
 Therefore, net income = gross income + BI - FT.

Initial estimates of BI and FT

For the purpose of this text, I have chosen round figures to simplify the calculations: BI = €1000/month and FT = 50%. If BIFT were implemented, these values would need to be adjusted.
Given these complexities, I will stick for the moment with round figures, BI = €1000/month and FT = 50%, to show how BIFT might work. The point is to get the general idea of BIFT accepted first (in particular, the idea of unconditional BI) and adjust the numbers later.

Special cases

This text focuses on the average person, but there are important exceptions, which apply throughout this text:
 Let's assume for the sake of argument that children receive half of the standard BI. If BI was €1000, a single parent with one child under 18 years would receive €1500 plus the freedom to earn any amount of additional money without losing the BI. A single parent with two children would receive €2000. One case in which this could really help people is domestic violence. BIFT would enable a mother with one or more children to leave a violent partner behind and live independently. 

In the case of pensioners, I am thinking of a system in which the basic income corresponds roughly to the current minimum pension. That being the case, net income for regular workers would be defined as income after tax and welfare PLUS that part of today's pension contributions that pays for the minimum pension in the future. Individuals would still be free to pay additional pension contributions.

Implicit progressivity

Today's tax systems are explicitly progressive: the more you earn, the more income tax you pay as a percentage of all earned income. For example, you may pay no tax in the lowest income bracket, 20% in the next, 35% in a medium bracket, and 50% in a high bracket.

BIFT is implicitly progressive. The tax rate is always the same (FT). If you earn more that about twice the BI or €2000 (in this simulation), the tax you pay exceeds BI. That is, you effectively become a taxpayer. In that situation, the more you earn, the greater proportion of your gross income is effectively paid in tax. The system is progressive, but the progressivity is implicit.
bift graph

Consider the graph again, with BI = €1000 and FT = 50%, for the sake of argument. The following examples make the implicit progressivity of BIFT clearer. In this way, BIFT solves the problem of bracket creep (or fiscal drag). In the present system, when inflation pushes wages and salaries into higher tax brackets, the effective tax rate increases although real earnings remain constant. The problem is solved by linking the boundaries between tax brackets to inflation. In BIFT, which is implicitly progressive, the problem does not arise, because there are no tax brackets.

Flat tax? Really?

Despite this demonstration of implicit progressivity, commentators on the left may still complain that BIFT includes a flat tax. The term has a bad reputation. Some conservative and far-right voters advocate flat income tax, arguing that it's unfair to ask the rich to pay higher rates of income tax, as in progressive tax systems. But a FT of the kind that they want -- one without BI -- would make the rich even richer and the poor even poorer.

Current income tax regimes attempt to solve this problem by writing progressivity into taxation law. In other words, progressivity is explicit. Richer people pay a higher proportion of their income back in tax. That is supposed to stop the wealth gap between rich and poor from getting bigger. Unfortunately, it is not working. The wealth gap has been rising for decades.

In BIFT, the expression "flat tax" has a different meaning. It is part of a system that is implicitly progressive. The degree of progressivity depends on how the two parameters, BI and FT, are set. The bigger the BI (or the bigger the FT), the more implicitly progressive the taxation becomes (and the more left-wing). The smaller the BI (or the smaller the FT), the less progressive (and the more right-wing).

Financing BI

Many oppose BI because they think it would be too expensive. In fact, BIFT would require no additional funding, if the line on the above graph was a line of best fit through the existing complex relationship between net and gross income. It's a matter of adjusting the amount of BI and the amount of FT to balance the books. Said another way, BI can be financed by income tax if both welfare and taxation are simultaneously and jointly simplified.

By simplying income tax, BIFT would make income tax harder to avoid. Since all income would be taxed at the same rate, the tax could often be collected immediately, without waiting until the end of the year. 

Some have discussed financing BI with consumption taxes. That is problematic if consumption taxes (e.g., VAT, Mehrwertssteuer) hurt the poor more than the rich. But in countries where consumption taxes are already quite high, it may be pragmatic for consumption taxes to contribute to financing BI within BIFT. They at least represent a stable and reliable source of income.

Guy Standing has proposed a basic income scheme underwritten by taxation on the rich. I am all in favor of wealth taxes. As the wealth gap between rich and poor widens and the number of billionaires increases, wealth taxes become all the more urgent. But I don't think BI should depend too much on wealth taxes, because they are politically unreliable. Whenever the government moves to the right, they risk being cut. For BI to work, it needs a strong foundation. Income tax is traditionally the biggest and most reliable source of state income.

BI supporters have also considered financing the BI with inheritance taxes, transaction taxes, and carbon taxes. We need more of all of those, to reduce the wealth gap, and all can contribute to BI. Modern Monetary Theory may also be relevant so this discussion. But once we realize that BIFT can finance itself, such discussions become unnecessary distractions. The point is to implement BI in the existing system.

The objection that "BIFT would be too expensive" is problematic in another way. Humanity has never been richer. There are about 3000 billionaires in the world, with a total wealth of $15 tn. If they paid normal and fair amounts of tax, there would be plenty of money for any beneficial project. The problem is not the expense -- it's the failure of governments to tax the rich fairly (or at all, in many cases).

Transparency and democracy

The present tax/welfare system is conservative, treating the unemployed like second- and third-class citizens merely because they lost their job, while at the same time making it easy for the rich to avoid tax. By labeling and stigmatizing the unemployed, the system invites the employed to blame the "lazy" unemployed for the country's woes, whatever they may be. That causes all kinds of anger and frustration, leading to violence and far-right politics. 

The current system is also complex. So much so, that no-one understands all the details and possibilities. People often think there must be a good reason for that, but there is not. The current system is complex for two bad reasons:
 With BIFT, neither of those two strategies would be possible. The system could only be changed or adjusted along one axis, from left wing to right wing. Left-wingers would push for higher rates of BI and FT, and right-wingers would push for the opposite. In that way, BIFT would be more democratic: more transparent and therefore easier for voters to understand. Democracy only works if people understand what they are voting for! In that way, BIFT would benefit the left.

Think about the complexity of tax and welfare systems and how that relates to transparency, fairness, and democracy. Both tax and welfare are currently so complicated that veritable armies of bureaucrats and accountants are needed to understand and administer them. Like specialist surgeons that understand only one part of the body, experts in tax or welfare are typically responsible for only one part of the system and have trouble seeing the big picture.

That gives the rich an advantage. They pay accountants to exploit the system's complexity, finding loopholes that will enable them to evade or avoid tax. The implications are enormous. The accountants of the rich are constantly reducing their tax bills and depriving governments of revenue. They do this in both legal and illegal ways. The rich can easily succeed in this game. For the middle classes, it's not so easy. Their accountants are more honest or less clever. The poor have no chance at all. They can't afford accountants.

The rich benefit from systemic complexity. The solution is not to give everyone a free accountant. The solution is to simplify the system. That should be a central left-wing agenda. Astonishingly, it is not. Are we so used to the complexity and opacity of both welfare and tax that we forget what a simple system would be like?

Relative to the current system, a simpler system would be more democratic, and in that sense more left-wing. But if BIFT was introduced, people of all political colors would soon get used to it and eventually regard it as normal, wondering how we survived so long with the previous, crazy system. Many conservatives would like BIFT because it reduces bureaucracy and government interference -- consistent with conservative calls for small government.

Sometimes the left is its own worst enemy. Left-wingers of different kinds struggle with each other, allowing the right to swoop in and win the next election. We cannot let that happen in the case of BI. The task of eliminating poverty and creating a caring society is too important. To overcome the right's stubborn resistance, which will always be there, we need to unify the left; and the left needs to understand BIFT.

Paradoxically, BIFT is often misunderstood despite its simplicity. That is because it turns the current system on its head. Instead of giving people benefits because they are desperate, it gives everyone the same benefit. Instead of taxing people because they have a good income, it taxes everyone. In that way, everyone is respected.  Paradoxically, in the end people on lower incomes are better off.

Unfortunately, many people refuse to believe that a system of welfare and taxation could be either simple or fair, let alone both at the same time. It's understandable. We are so used to the current complicated system that we have lost the ability to appreciate the benefits of simplicity and clarity. We have forgotten what it is like to actually understand how the system works. 

For a change, BIFT is not a trick. It is too simple for that. Its power lies in its simplicity. Nor is BIFT politically left or right. It is politically neutral. It is a new foundation for productive, fair collaboration between left and right. Whereas the most immediate benefits would be felt on the left as poverty was effectively eliminated, the right would also benefit from improved long-term financial stability.

Democratic determination of BI and FT rates

The rates of BI and FT used for the graph are only for illustration. The exact values would be determined in a democratic political process. Socialists would prefer a higher rate of BI, and a higher rate of FT to finance it. Capitalists would prefer a lower rate of both BI and FT. The two groups would meet somewhere in the middle. The result would be fairer and more transparent than the current system.  

Because BIFT is so simple, it would be easy to predict the consequences of such changes, so people would really understand what they were voting for. Today, people without the privilege of a good education are often tricked into voting conservative by privately owned media. BIFT would make it harder to trick people. They could make informed decisions and act in their self-interest.

I am assuming that the government would roughly balance the books, paying out the same amount in BI as it receives in FT. For example, I assume in the above examples that a flat income tax of 50% would entirely finance the basic income. The tax rate could be lower if supplemented by wealth taxes or similar. In reality, things are not quite like that, but for the purpose of argument it's a reasonable assumption. Economic stability is an important factor.

How much BI is the right amount? The political left tends to argue for a relatively high amount that clearly lifts everyone out of poverty. They propose an amount that is higher than usual measures of the poverty line, and higher than the minimum total benefit currently received by the long-term unemployed. The political right tends on the contrary to argue for a lower amount that forces people to work at least a few hours per week to make ends meet. Perhaps the truth lies between these two approaches?

A relatively high BI might be justified if it was less than gross national product divided by the (adult) population. But a high BI could have enormous political and macroeconomic consequences. The history of economic revolutions and radical reforms teaches us that it is better to change the political and economic landscape gradually, to encourage stability and avoid any future backlash.

Besides, in a democracy, BI can only be introduced if a majority of people agree with it. If the amount being proposed seems to high, BI won't happen. Unfortunately, many fear the BI will make people lazy -- especially if the BI is relatively high. Those people are unlikely to change their minds until they see with their own eyes that BIFT motivates everyone to work regardless of income.

The BI is often supposed to "meet a person's basic needs", but estimates of what that costs vary. The BI that I am proposing would be rather low compared to typical estimates -- less than the poverty line (however defined) or the minimum total benefit usually received by the long-term unemployed. A relatively low BI would be reasonable given that, for the first time, unemployed or unwaged people would be free to supplement their benefit for a few hours or a couple of days per week without losing any of it. The extra income would be taxed, but that tax burden would be much smaller than the burden of losing some or all of unemployment benefit.

Keeping that in mind, there are two ways to set and adjust the BI -- at least initially, when it is first introduced:
 Both BI and FT would be periodically adjusted in a democratic process. That would allow the BI to be increased gradually after being introduced. In that way, poverty could be minimized or eliminated.

Now imagine a situation where BIFT is already in force. Some people look at the straight line in the graph and start thinking about bending it. The following arguments suggest that they would never succeed in doing that. Instead, they would learn the virtues of keeping the line straight. Here is how it might happen: Said another way: life becomes much simpler when the line on the graph is kept straight by law, which prevents such misleading discussions from even starting. The only real question is how to set the two parameters BI and FT.

The end of tax deductions

In the current system, income earners typically pay tax on their income throughout the year. At the end of the year, they submit a claim for a tax return. The final amount of tax paid depends on this yearly statement. The claim includes expenses incurred when earning income, which are often deducted from income.

People love tax deductions because they reduce their tax bill. The trouble is, tax deductions also reduce the tax bill of the rich, and the rich typically save more money this way. The richer you are, the more you can pay accountants to dream up brilliant tax deduction schemes. The richer you are, the more you can invest in your business -- your means of production. In the end, the current system of tax deductions means that people with low or medium incomes pay more tax relative to the rich.

If I want to teach the piano, it is my problem to buy the piano for the lessons. It is my business to estimate the risk, not the government's. Banks are available to lend me the money and it is their problem to decide whether I am likely to pay the money back or not. If the government wants to promote piano teaching for political reasons, they can give me a subsidy.

Under BIFT, one might realistically imagine a world with no tax deductions, no tax statements, and no tax returns for most people. This radical simplification, which would benefit the poor more than the rich, is possible because both BI and FT involve flat rates. It would no longer be necessary to wait until the end of the year to calculate your tax. More often than that (probably every month) there would be an electronic financial transaction between each individual and the government. Those on low incomes would receive money and those on high incomes would pay. The amount would be calculated according to the above graph. Each transaction would be closed and complete.

BIFT would be introduced in stages, in a transition period (see below). During that same time, tax deductions could be gradually phased out -- just as governments currently change which expenses count as deductions and which do not (more). 

The end of cash

BIFT assumes that all income is taxed. For BIFT to work fairly, all income must be declared. A possible way to achieve that is to make it illegal to pay by cash in exchange for work. To receive any income, whether BI or wages, it would be necessary to open a bank account and receive the money by appropriately labeled bank transfer. Going even further, BIFT might work best in a cashless society in which all financial exchanges are electronically recorded.

That raises well-known issues of privacy and centralized control. But a cashless economy also has advantages: reduced business costs, less tax evasion, less money laundering (more). Getting rid of cash might even reduce transmission of disease (on dirty banknotes). The world seems in any case to be moving in the direction of a cashless economy, so let's see how that develops.

Why BIFT is good

In the interests of long-term stability, BIFT would fulfill the following four criteria proposed by Georg Quaas in 2017:
The transition to BIFT 

Public economic systems are complex and their many elements interact in complex and sometimes unpredictable ways. The path toward BIFT should therefore be taken in relatively small steps, each time waiting for a new equilibrium to be established. Changes that are unnecessarily large or fast should be avoided.

The first step might be to draw a line of best fit through the current relationship between gross and net income such that the net income of low income earners slightly increased and that of high income earners  slightly fell. In this first stage, the BI would be relatively small. It would be subtracted from existing benefits so that for most receivers the total benefit would remained unchanged.

The BI would then be increased in a series of steps, each time reducing or eliminating corresponding benefits and adjusting FT to balance the national budget. The goal would be to eliminate poverty by gradually increasing BI to the poverty line, however defined. That way, the incentive to work would be maintained.

At every step toward BIFT, the relationship between the supply and demand of labor would change. Inflation might increase for two reasons:
 BIFT would reduce the wealth gap: whereas poorer people would have more money to spend, richer people would have less. If that relationship was carefully managed, the effect on inflation would be small or negligible. 

Inflation could be reduced by increasing interest rates to limit the rate of private borrowing. Gradually, new stable relationships between inflation and employment would emerge. Unemployment would no longer be the problem that it is today, because it would no longer be linked to poverty. It would become more difficult to measure unemployment because more people would work part-time and there would be more flexibility in the duration of part-time work.
Why we need BIFT

A vision for a better world

As the world lurches from one crisis to the next, and the number of billionaires steadily increases, undermining democracy, many are talking about reforming capitalism to make it sustainable. But people have different ideas about how to do that.

On the one hand, we need globally harmonized wealth taxes. That could stop the rich moving their wealth internationally to avoid tax. That should be clear. But we also need to reform public economics, to improve quality of life for all people, regardless of wealth. That means reforming the way income is taxed, and reforming the way welfare payments are distributed. 

In "Marx in Soho: A Play on History", Howard Zinn proposed: "Give people what they need: food, medicine, clean air, pure water, trees and grass, pleasant homes to live in, some hours of work, more hours of leisure. Don't ask who deserves it. Every human being deserves it." BIFT is a way of making that happen in a practical and sustainable way.

Imagine achieving all of the following social goals, simultaneously:
A similar list was presented by Guy Standing in his book "Battling Eight Giants: Basic Income Now" (London: Bloomsbury, 2020). He argued that basic income (more than other possible social policies) would address inequality, insecurity, debt, stress, precarity, automation, populism, and extinction. 

The government of any country in the world could achieve all these points by replacing their current complex welfare and explicitly progressive income tax systems by BIFT. That may seem like a wild, exaggerated claim; but I am not aware of any good counterargument. Besides, BIFT has never happened before. The best way to test BIFT is to actually introduce it -- probably in stages -- then to monitor progress.

Going back in time, it was hard to imagine the French revolution before it happened, or the vote for women, or the universal declaration of human rights. But today, after these important historical developments, we take them for granted and consider them essential. We have no intention of going back to a world without freedom, equality, and solidarity, or without equal rights for women, or without human rights.

Now, imagine a world in which we take it for granted that poverty has been eliminated and will never come back. The real possibility of introducing a universal BI means that a world of that kind is now possible. So there is no longer any particular reason why we should not decide to achieve it. It could merely be a matter of attitude! Imagine that.

If tax-welfare system were radically simplified and BIFT were introduced, we could achieve:
 Can a single idea be that good? Some suspect not, but that is not a good argument. A good argument is one that engages with the specific issues, such as those just listed. 

Beyond the listed points, BIFT would bring the usual, well-known benefits of BI.
Myths about BI

These points allow us to revisit a series of common myths about BI.
 In the current system, if you are unemployed, you get unemployment benefit. Usually, it is not enough to live on. That is because the rich are trying to keep the benefit low. Their logic: If the benefit was too high, you would not be motivated to accept poorly paid jobs, and the rich could not get people to work for them (at least, not for the low wages they would like to pay). Even if the rich were feeling generous, poverty would not necessarily be eliminated by raising the benefit, because that would reduce the motivation to work and hence the amount of work that gets done, with negative economic consequences. If you are on unemployment benefit and get a chance to earn a small amount of money, the money is deducted from your benefit. So there is no point doing that work! That's why the unemployed often refuse job offers. It's called the welfare trap. BIFT solves this problem by turning the system on its head, as shown in the figure above. Under BIFT, no matter how much money you have to spend every month, the amount goes up if you do extra paid work. In this way, BIFT motivates people to work more, regardless of their current income. BIFT would radically reduce the waste that is inherent in the present system. An example of waste is the money paid to employment officers to monitor recipients of unemployment benefits. (Are the welfare recipients really looking for work? Are they attending job interviews?) BIFT shows that this monitoring work is unnecessary. There is also a tax problem. The rich often pay little or no tax. They achieve that by playing with loopholes and international differences in taxation law. Governments typically lose much more in tax evasion (including international tax havens) than in welfare fraud (more). The solution is to require everyone to pay fair amounts of tax. A simple, transparent approach like BIFT makes that easier to achieve.  BIFT could unleash an unprecedented surge of individual creativity. For the first time, people would be free to choose what kind of work they do. As long as that is not happening, an enormous amount of human potential is going to waste. Besides, there is plenty of money. Humanity has never been so rich, and the rich are hoarding unimaginably enormous amounts. There are 2000 billionaires and 50 million millionaires in today's world, and both groups are growing steadily. Governments just need to tax them in a normal way and distribute the wealth a little more fairly.
 Many people work for no money, and their work is absolutely essential. Without them, the system would collapse. Some are looking after other people: children, the elderly, the disabled. These "carers" are more often women than men, which explains why women have less money than men on average, and more often live in poverty. Others are educating themselves (e.g., school children). Unemployment is inherent in today's economic systems. Economists agree that it will never go away. There is an obvious reason. the better technology gets, the less work there is to do. You cannot expect people to work for every bit of money they get when there is not enough work to do.

The rich can be as lazy as they like as long as someone is looking after their money. Most of the rich got most of their money without working. They either inherited it or manipulated the system to ensure the big money flowed their way. Usually both. If we had to work for every bit of money we got, inheritance would be illegal! At the very least there would be high inheritance taxes, say 50%. Beyond, that, billionaires never "earn" more than a tiny fraction of their money. To earn a billion dollars at 10 dollars per hour (24 hours a day, 7 days a week) would take 100 million hours, that's over 10,000 years.

Clearly, not everyone has to work. So why do we stubbornly believe that everyone has to work? Ideas that we take for granted are often socially constructed by powerful people to serve their interests. This particular idea is promoted by the rich to ensure that the poor will keep working for them. The idea is also promoted by the middle classes, whose position in the pecking order depends on their support for the rich.

What is true is first that everyone needs enough money to live on, to ensure quality of life and second that everyone needs to be motivated to work, to ensure that the important work is done.
BIFT would reduce the net income of the rich. For them, the increase in FT would exceed the BI. Besides, if the BI was means tested, someone would have to apply that test and check people were providing the correct information. Many would try to trick the system. How many bureaucrats would be needed to administer that? Policians like to claim that they are using public money efficiently by making sure those who need it get it, and those who do not do not. From that perspective, BIFT is a bad idea. It is too inflexible! In other words, politicians can no longer manipulate welfare and taxation to attract voters in specific categories and win elections.

In fact, when it comes to ensuring people’s livelihoods, inflexibility is a virtue. The risk of arbitrary exceptions, discrimination, favoritism and so on is avoided. What is flexible is the numerical value of the BI and the FT, both of which can be adjusted in democratic political processes. After that, both values apply to all people equally.

The universal declaration of human rights is similarly inflexible. Everyone has the same rights and obligations, period.

The need for left-wing economic theory

A 2019 article in The Guardian entitled "The new left economics", Andy Beckett observed that
For almost half a century, something vital has been missing from leftwing politics in western countries. Since the 70s, the left has changed how many people think about prejudice, personal identity and freedom. It has exposed capitalism’s cruelties. It has sometimes won elections, and sometimes governed effectively afterwards. But it has not been able to change fundamentally how wealth and work function in society – or even provide a compelling vision of how that might be done. The left, in short, has not had an economic policy.

BIFT is a response to that challenge. The world needs new left-wing economic theory and policy that can eliminate poverty and reduce the wealth gap in the 21st century.

Left-wing economic theory is a diverse thing, and it even includes objections to BI. Many on the left have been suspicious about BI ever since Milton Friedman, a conservative US economist, proposed negative income tax, which is almost the same thing. Milton Friedman also inspired the unmitigated disaster of neoliberalism. It was part of his theory of freedom.

But something is not bad just because a bad person proposed it. Vegetarianism is not bad because Hitler was a vegetarian. The concept of BIFT that I am proposing is a general foundation that both the right and the left can use for their own purposes. The right can reduce BI way below the poverty line while at the same time reducing FT. Of course, I totally oppose that idea, but it is theoretically possible. The left can elevate BI well above the poverty line, while increasing FT to finance it. I also oppose that, because it would stifle incentive to work. The point is to democratically find a middle path that allows everyone to enjoy the benefits of both appropriately tamed capitalism (the source of wealth and abundance) and appropriately democratic socialism (the source of community and solidarity). The aim of this document is to describe how that middle path can be achieved in practice.

The main aim of right-wing politics is to maintain or increase the wealth of the rich, which usually means maintaining or exacerbating poverty. One important right-wing strategy is to lie about economics. It also helps to own the media. That being the case, the political left generally benefits from simplification of tax-welfare systems: This, then, is the left-wing economic theory that I am proposing: radical simplification of both tax and social security so that poverty can be eliminated and everyone is motivated to work (but free not to), and the right can no longer trick and deceive the left. Democracy based on human rights and honesty.

The art of political compromise

Imagine a peaceful society with a high standard of living and a sustainable economy. It can be achieved by striving for a balance between two principles: the right-wing principle of motivation to work and the left-wing principle of fairness.
We don't have to choose between those two alternatives. We can have both. BIFT shows how it would work.

For individuals, financial success in one's chosen career usually depends on two things: privilege and work or talent. You usually need both to succeed financially, but there are exceptions. Everyone knows stories of rags to riches (e.g., Bob Marley had no privilege, but certainly had talent, and he also worked hard). There are also stories of rich people who live off their inheritance and otherwise do very little (see any celebrity gossip magazine). And there are are the fallen billionaires, and lotto winners who squander everything. These extreme examples are especially interesting, so we remember them more easily that other everyday examples. But they are exceptional. In fact, most people need both privilege and work/talent to succeed. BIFT makes it possible for everyone to succeed financially by giving everyone a certain privilege (BI, corresponding to left-wing ideology), and rewarding everyone to the same extent for their work/talent (FT, a right-wing idea). In that way, BIFT can be truly democratic and bipartisan.

Capitalism has achieved a lot, but it never managed to eliminate poverty. In a capitalist economy, a rich elite is in charge (democracy is not working), most people are struggling to get by (poverty is intrinsic), and the system is gradually destroying itself (biodiversity loss, climate change, nuclear threat). The communists similarly tried valiantly and idealistically to eliminate poverty, but failed. That is because someone has to be in charge, and power inevitably corrupts. Communism sounds great in theory, but in practice it tends to make everyone poor except for a small elite. It also has a remarkable tendency toward self-destruction. The failure of communism does not make capitalism any better. Humanity has tried repeatedly to make either communism or capitalism work, but neither solution was stable or sustainable.

BIFT offers a middle path. On the political spectrum, BIFT is centre-left, lying between the traditional left (Labor) and the centre. BIFT is not anti-communist, nor is it anti-capitalist. It is about finding the best compromise. We already have a compromise of sorts, but it is not working very well. The compromise adopted by modern democratic states accepts capitalism as the main driver of wealth and tames it, preventing its more destructive laissez-faire tendencies. That's good, but we can do better.

The above graph is based on two well-known and widely accepted ideas:
  1. Regardless of income, everyone should always have enough money to live on. Freedom from poverty is a human right.
  2. The more you earn, the more you take home. People should be fairly rewarded for their hard work, good ideas, and social contributions.
Regardless of your political ideology, you can hardly disagree with either proposition. If you are poor and suddenly start to earn good money, you surely deserve to keep most of it. If you are rich and suddenly lose everything, you surely deserve a meal and a roof over your head. Nothing could be fairer than to treat everyone equally according to these two principles.

BIFT would treat everyone equally, abolishing the stigma of unemployment and class differences. Under BIFT, everyone would have the same rights and the same obligations, regardless of income. Everyone would have the right to work hard and earn more, the right to be lazy and earn less, the right to take time off for an indefinite period, the right to be creative, the right to explore new horizons, and the right to look after other people without risking poverty.

On the left side of politics, two different ways of eliminating poverty can be distinguished: eliminating unemployment and introducing universal BI. Contrary to popular belief, both are possible. Full employment means the government will offer a reasonable job to anyone who wants one, but will not force anyone to accept any job.

According to Modern Monetary Theory, any government can do that simply by creating the money. There is always a lot of work to do (in sustainable energy, promoting biodiversity, infrastructure, health and so on). Creating money causes inflation, which can be avoided by taxing the rich. The wealth of the rich is enormous and steadily increasing. The total global wealth of all billionaires is about $15tn and there is about $10tn in tax havens. This wealth must be taxed directly to reduce the power of the rich and move back in the direction of democracy.

Whereas many lefties and unionists prefer the idea of full employment, many greenies and liberals think that full employment would restrict people’s freedom too much, and argue for BI instead. Conversely, whereas many greenies and liberals prefer BI, many lefties and unionists point out that people need to work to feel wanted and useful, so it’s better to offer full employment. But there is no need to choose, because both full employment  and BI are possible at the same time. BIFT aims to achieve both.

Making capitalism sustainable

In a market-based economy characterized by long-term unemployment, a BI that corresponds roughly to the poverty line is the only reliable way to eliminate poverty. In a free market, there are always winners and losers, so there is always unemployment. Governments need to ensure that everyone can participate in the market and human rights are respected. BI is the only reliable solution to this problem.

That's why, in the board game of Monopoly, every player, rich or poor, gets a BI of $200, paid every time the player passes "go". Without that BI, you can't play Monopoly. Of course, capitalism is only sustainable if monopolies are prevented by democratic and legal mechanisms, but that is a different issue (more).

Equality of opportunity can only be guaranteed if governments give everyone (regardless of other wealth or income) an amount corresponding to the poverty line, on the condition that in return everyone (regardless of wealth or income) gives back a certain proportion of all wealth and a certain proportion of all income. That's a fair deal for everyone, regardless of differences in wealth in income.

BI is consistent with human rights. It not only treats everyone equally and with dignity, regardless of wealth or income -- it also controls and reduces the gap between rich and poor. The rising wealth gap is one of the world's most pressing problems, and BI could be part of the solution; we also need new wealth, transaction and environment taxes.

Ending slavery and the working poor

A slave is a person who is forced to work or face serious consequences. The most serious consequence is death. Less serious consequences include punishment and poverty.

Democratic countries decided to end slavery long ago. But did they really end it? A tax-welfare system that forces people to work is a form of slavery: those who reject inappropriate work are threatened with poverty.

BIFT would abolish slavery completely, for the first time. No one would be forced to work against their will. At the same time, everyone would be motivated to work, because welfare traps would be eliminated.
 Denial of human equality has a long and shocking history. The Nazis coined the phrase lebensunwertes Leben (life unworthy of life) for people who were considered biologically inferior, including those that could not work for health reasons. Many of those people were murdered. Today, we want to ensure that nothing of that kind ever happens again. Universal BI can he by acknowledging the equal intrinsic worth of every person in a concrete and tangible way. Ending poverty

Humanity has achieved many things, including eliminating slavery and promoting democracy and human rights, including equal rights for women. All of these goals were achieved to a large extent, if not perfectly.

Today, the world is richer than ever before. It's time to eliminate poverty. That can be done if three conditions are fulfilled: The present system does none of these things -- a massive failure. BIFT solves all three problems simultaneously. These principles apply in any country, rich or poor. BIFT is an especially interesting way to help disadvantaged ("developing") countries improve their economies. Instead of giving official development assistance to governmental and non-governmental organisations, where it sometimes mysteriously disappears, the governments of richer countries could give directly to individuals as BI, avoiding intermediaries. To benefit from this strategy, people in the target country would need ID cards linked to private registered bank accounts. Everyone, rich and poor, would receive the same rate, financed for example by taxes for the rich, or new measures to prevent tax evasion and avoidance. The donor countries would help set up international control structures to ensure the system works with a minimum of abuse or corruption. Countries with sexist legal systems would not qualify unless it was clear that women and girls had independent ID cards and bank accounts and corresponding equal rights. Weitere Infos

Basic income would, for the first time in history, realize the human right to a reasonable standard of living. It would reform public economics such that human rights were automatically achieved as an integral part of the system. Caring for the environment would also become an integral part; basic income would give people the means to deal rationally with environmental problems. Basic income is an appropriate foundation for public economics because it simultaneously promotes efficiency and equity -- treating all people equally, but also giving people the freedom to be different. weitere infos

Promoting equity

Economic equity does not mean equal income or equal wealth. It means equal economic rights and opportunity. It means equal pay for equal work. Anything else would be arbitrary discrimination.

BIFT shows that it is possible for governments to treat everyone equally while at the same time eliminating poverty. That is not only a matter of handouts (the left-wing approach). It's also a matter of motivating people to work (the right-wing approach) and maintaining individual freedoms (which everyone should be concerned about).

Imagine a combined tax-welfare system that (i) eliminates poverty and (ii) is so simple and transparent that everyone can understand it. A system that treats people of all incomes with equal dignity and fairness, but also with equal strictness. Too good to be true?

In such a system, welfare and tax would change in several ways: Everyone, regardless of wealth or income, would be treated equally according to the same simple rules. That's equity! Imagine that: a world in which people are not only equal on paper, but equal in reality.

Realising human rights

Freedom from poverty is included in the Universal Declaration of Human Rights. The trouble is, no country in the world is actually implementing this agreement, because no country in the world has an unconditional BI. That is a pretty bad track record for humanity in the early 21st Century. We had better get a move on.

According to Article 25 of the Universal Declaration of Human Rights,
(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

(2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.

These things can be guaranteed with a universal BI. Whether they can be guaranteed any other way is a good question. Many countries are trying to solve these problems by conventional welfare payments, but data on poverty rates suggest that not many are succeeding. When bureacrats try to evaluate countless individual cases, their work is expensive, their success is limited, and they constantly infringe the right to privacy of their clients. Article 12 of the Universal Declaration of Human Rights provides that
Article 12. No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.

Unemployment offices are infringing this right all the time! They believe that they have no choice but to pry into people's private lives, in order to guarantee that the welfare system is fairly administered. This is not true. It is fairer, more efficient, and more respectful -- all three of these things -- to give everyone a BI (flat rate) and tax all other income (flat rate).

In short: BIFT would allow economic rights that are guaranteed in the Universal Declaration of Human Rights to be actually achieved for the first time.

Redistributing wealth

Imagine a radically simplified tax-welfare system that makes it harder for the rich to avoid or evade tax. For an individual rich person, the difference between tax paid before and after introducing the new system would be bigger than the BI that everyone receives. At the end of the day, the rich would have a little less money (relative to what they have now) and the poor (or those that used to be poor) would have a lot more money (relative to what they have now).

There is a lot of money in the world. There were 1,810 dollar billionaires on the 2016 Forbes list, 89% of whom were men. They altogether owned $6.5 trillion – as much as the bottom 70% of humanity (more). If this money was distributed equally among the entire world's population, each woman, man and child would get $1000. That's enough to live on for more than a year above a poverty line of $2 per day.

This example shows that there is now enough money in the world to eliminate poverty everywhere, by redistributing part of the wealth of the rich. It would not be necessary to redistribute all of their wealth. The rich would stay rich and there would still be a big gap between the rich and the not so rich.

How could governments get hold of this money? It's not as hard as many people think. The government just has to change the law. By introducing or increasing wealth taxes. By harmonizing wealth taxes internationally to prevent capital flight. By simplifying the law both within and between countries to reduce opportunities to evade or avoid tax. By improving international agreements to suppress tax havens. All of these things are possible if politicians have a clear approach that voters can understand.

That makes eliminating poverty a realistic, win-win proposition. It is no longer a dangerous revolutionary battle-cry. So why don't we go ahead and do it?

Of course, the rich (with some refreshing exceptions) would try to block such a development. But that's not the only problem. There is another big obstacle, it seems. The rest of us find it hard to imagine a world without poverty, because it never happened before.

Many people think that only rich countries can afford BI. Not true. Every country has its own tax/welfare system and its own graph of income after tax/welfare against income before .

Even without wealth taxes, BI can be financed by converting that graph to a straight line -- a "line of best fit" or a "regression line" that balances the budget. The point where the line crosses the vertical axis would be the BI. This process could happen in any country, because the existing relationship between income before and after tax/welfare in most countries is already surprisingly close to that straight line. To finance a BI, most countries could also get additional revenue from wealth, transaction, or environment taxes, especially if there were international agreements to introduce, harmonize, and gradually increase those taxes.

BI would differ a lot from country to country, but introducing BI in different countries could help reduce the differences. According to the World Bank, the poverty line in poorer countries is $1.90 per day or $60 per month. But in the USA, the poverty line is about $1000 per month, according to the Census Bureau. In Europe, when the poverty line is defined as 60% of median income, it is about €1000 per month.

Tackling poverty and climate change

BI could help humanity address the challenge of climate change. Climate today's biggest issue, because everything depends on it. Many people regard climate change as a consequence of capitalism. Capitalism created climate change and is preventing solutions; therefore, we need to throw it out. Or so the logic goes. But capitalism could only be ended violently, and the result is unlikely to be democratic. We need a more moderate solution that maintains a reasonable level of democracy (better than what we have now). Capitalism needs to be tamed and brought under democratic control. BI is a promising way to achieve that.

 Economies have always needed natural resources, and natural resources have always been limited. "Economic growth" is traditionally presented as something positive, but today it may be the biggest force driving environmental destruction.

In rich countries, we have passed the limit of ecological sustainability. To get back on track, we need a sustainable economy with zero or negative economic growth. Poorer countries still need economic growth, but the growth must be environmentally sustainable.

BIFT would move the economy in the direction of a new ecological balance, in two ways. First, it would eliminate the existential necessity of work. Under BIFT, work and its benefits would become voluntary. Second, it would distribute the incentive to work more equally across socio-economic classes.

Both of these features mean that BIFT would be fairer than the current system. Everyone would be treated equally. Low income earners could survive without working, but working would always improve their quality of life and enable them to transition to different socio-economic levels. High income earners would pay more tax, but they would still be financially rewarded for their work or success.

 The carbon fee and dividend (CF&D) approach to reducing carbon emissions is to tax carbon (or charge a "fee", for those who are allergic to the word "tax") and give the entire proceeds back to the general population, divided equally ("dividend"). That way, everyone could afford the tax (there would be no French yellow vest effect). In fact, people on low incomes would generally be better off.

The carbon fee would also apply to imported goods that have not already been carbon-taxed, which would put other countries under pressure to adopt a similar system. Both fee and dividend would be introduced gradually. The idea is nicely explained by Californian entrepreneur Dan Miller (Roda group) in a Ted talk.

CF&D is the same as BIFT (introduced below) with one exception: it taxes carbon rather than income. The rate of tax is flat in both cases. If the two ideas co-existed, income tax could be reduced by increasing carbon tax and vice-versa. In that way, could CF&D be a stepping stone toward a simpler, fairer, more motivating tax-welfare system that eliminates poverty.

In both cases, the rich will resist, because in both cases they would pay more than they receive and it would be harder for them to play their usual tricks with legal loopholes. But if more people vote on the left-green side of politics such reforms are possible.
Literature

There is surprisingly little economic literature on BIFT. Many experts in public economics must have considered it -- the benefits, after all, are obvious. But the few who write about it avoid listing the multiple benefits and instead tend to present misleading reasons why it should not be introduced. Either that or they exaggerate the problems relative to the benefits. At the end, they stop short of recommending it.

The reason is presumably that the rich don't like BIFT. It's too fair. It treats everyone equally! The rich prefer the current corrupt system, which is giving them a free ride. BIFT exposes this gigantic trick. No wonder it's unpopular.

The present system claims to give special treatment to the poor: welfare payments and progressive tax scales. But the present system also gives special treatment to the rich, and at the end of the day the rich gain much more than the poor. The rich are hiding their money in tax havens and taking advantage of tax deductions, hedge funds, black-box charities, donor-advised funds with huge tax benefits ("philanthropic fracking"), and other accounting tricks and neoliberal fraud. That is why we still have chronic poverty and a wide and widening wealth gap. The rich would like to keep things that way, which is one way of defining "conservative".

The solution is to radically simplify the system, making it more transparent so that tricks of this kind are no longer possible. As an example of such simplification, BIFT should be an important part of left-wing politics.

Why are economists so reluctant to talk about BIFT? I am not an economist, so I can only guess the reason. If you are an economist in mid-career, you are looking for a permanent position. You know you will only get one if you publish material that is acceptable to the rich. That is an unwritten rule in general, but especially in the academic discipline of economics. If you have ever noticed a certain political conservatism among professors and leading journals of economics, that could be the reason.

Seen from this perspective, the discipline of economics may be even more distorted and corrupted than other academic disciplines. It's not the fault of individual economists, many of whom are brilliant mathematicians and sociologists. It's because economics is about money, which everyone wants. Beyond that, there are everyday existential reasons. Like everyone else, economists need an income to feed their families and pay their mortgages, so they have to be careful what they say. There are limits to what you can reasonably talk about, and successful economists know intuitively where those limits lie.

From that point of view it may be interesting to compare the discipline of economics with the global community of climate deniers. For decades, professional deniers have been creating and propagating misleading theories about climate change, with the aim of preventing urgently necessary climate action. Behind the global climate denial movement are massive financial interests. There are similarly massive financial interests behind the discipline of economics, and they stand in the way of any attempt to make tax more fair and transparent, or to expose what is really going on when governments demand tax from the rich.

So it is no surprise that some economic studies of BIFT have concluded there is something wrong with it, or it needs further investigation before it can be taken seriously or implemented. Many claim that BIFT would be "too expensive" without considering the extraordinary inefficiency of the current system. The current system is not only enormously expensive, it is also contributing to human self-destruction by climate change, because significant emissions reductions will only be possible if people can pay high carbon taxes. For that to work, we need to eliminate poverty first.

Here are a few articles that I found about BIFT and some brief comments. Articles in which BI is (somewhat misleadingly) called "negative income tax" are not listed. The author of this book evidently believes in BIFT, otherwise he would not have written a book about it. But he claims to be neither for or against BIFT, and merely suggests that it should be seriously investigated, knowing full well that it won't. The authors find that "to ensure that no current social security beneficiaries become worse off under such a system would either be very expensive to introduce or require a tax rate that is likely to be unacceptably high". By "very expensive" I guess they mean that the rich would have to pay fair levels of tax according to a transparent system, following the same rules as everyone else. This author genuinely believes in BIFT and may have taken some risks by proposing it directly. In his paper he focuses on some of the real benefits. He points out that "in New Zealand at least, a de facto BIFT tax-benefit regime already exists, and that therefore there need be no significant transitional redistributions arising from a formal adoption of a Basic Income Flat Tax structure". The same could be said for many other countries. The author compares the implications of left-wing (high BI and high FT) and right-wing (low BI and low FT) versions of BIFT and finds neither be an acceptable alternative to the current system. By "acceptable" I guess she means "acceptible to the rich". Everyone else would love it.
 This is a genuine attempt to propose an urgently needed reform. Figure 4 (Abbildung 4, Abb. 4) of this paper is essentially the same as the graph the present paper. It shows how FT goes up as BI goes up and vice versa.
The author

You may be wondering who is writing this and why. It's a fair question.

The short answer is that I studied physics and publish research in psychology. I am interested in clear thinking and the correct use of mathematical arguments. 

The longer answer starts in 1987, when I finished writing my doctoral thesis at the University of New England in Armidale NSW Australia. I then got the chance to publish it as a book. But for that I needed another three months to revise the thesis, taking into account the examiners' many helpful suggestions. During that time I would have no income.

So I went to the local unemployment office and applied for the "dole". There was a form to fill in. It asked me to declare all income, which would be deducted from the handout. I did indeed have other income: I was playing the piano in a restaurant and being paid in cash. But there was no record of that income. I guess only the restaurant manager and myself knew about it. Should I declare it or not?

Then I looked at the other people standing in line. They were being asked the same question. The government was generously believing their answers, but at the same time encouraging them to be dishonest about their income. The system was also discouraging them to work. If an honest person was offered a few hours work for cash in that situation, s/he would be motivated not to accept the offer. How crazy is that?

The importance of encouraging honesty should not be underestimated. We live in a world of lies and liars.Trumpism is the tip of an iceberg. Dishonesty is paralyzing our political systems and our democracy. Take for example the climate denial that is regularly published in the Murdoch media (Newscorp). Climate denial is literally threatening the future survival of humanity. The same applies to international tax evasion, and many other political problems. Most of our existential human problems involve lying and dishonesty. We need to improve school education in the general area of morality and ethics and to promote a positive society based on personal trust, in which each individual's personal dignity depends on her or his own honesty and reliability.

Back then in Armidale NSW, I had been studying physics and doing a lot of mathematical modeling and computer programming. With that in mind, the solution was obvious: just take the current rather complex graph of net income against gross income and draw a straight line through it ("line of best fit", "regression line"). In other words: give everyone the "dole" and tax all income at the same flat rate. Treat everyone equally and close the unemployment office. Suddenly everyone would have enough to live on, everyone would be motivated to work, and the government would no longer encourage people to lie about their income. Bingo!

I also realised that BIFT is implicitly progressive, and realised how important it is for people to understand two points: First, under BIFT the more you earn the higher proportion of your income is paid in tax. Second, the tax brackets of the present system encourage dishonesty. Creative accounts use them to avoid tax by shifting income around. Tax evasion is regressive, if people on higher incomes (the ones who can afford good accountants) end up paying a smaller proportion of their income in tax than people on lower incomes. The best way to ensure that all income tax is paid in full is to make the tax rate flat.

Ever since then I have been trying to explain this idea to other people -- mostly in vain. What could be more surprising than an idea that hardly anyone understands -- although it would clearly benefit everyone and the whole society. And the idea is so simple!

I started by publishing a short article in Nucleus, the student newspaper of the University of New England. Later, I found out that the idea of negative income tax had been around for decades, but for some reason no-one had managed to introduce it and there was almost no discussion about it. It's a bit like global warming -- in the 1980s, as now, it was the most important thing I should have learned about in my physics training, but to my knowledge none of my teachers ever mentioned it.

Incidentally, I am not writing this in an attempt to improve my own income. I am lucky that my income is good, typical of the middle of the middle class in a rich country. If anything, BIFT would slightly reduce my net income, because it would slightly reduce the incomes of most moderately good earners to finance the BI. That is surely a small price to pay for the satisfaction of seeing poverty eliminated and living in a fairer, more democratic society. I have only one thing to gain from this idea being more widely understood, and that is the satisfaction of living in a saner world.

Acknowledgments. I thank Martin Diendorfer, Manfred Füllsack, Robert Hill, Lukas Meyer, and Georg Quaas for useful feedback.

The opinions expressed on this page are the author's personal opinions. Readers who know and care about this topic are kindly asked to contact the author with suggestions for improving or extending the content: parncutt at gmx dot at.