Granting unconditional basic income would result in elevated tax levels and depletion of wealth
According to a research conducted by specialists from the RWI – Leibniz Institute for Economic Research and the Institute for Economic Policy and Law (IVR) at the University of Stuttgart, implementing a Universal Basic Income (UBI) could result in significant tax hikes and a noticeable drop in wealth in Germany. Although UBI simplifies the social system by offering all citizens a government-funded basic income regardless of necessity, the report issued on Wednesday highlights that government income would decrease due to decreased work motivation and fewer work hours.
The researchers analyzed different UBI scenarios.
Supporters of UBI argue that the state should guarantee every citizen with an income sufficient for survival, without the need for means testing or employment requirements. This belief is embedded in the manches of the Left and Green parties in the Bundestag.
The study's computations suggest that implementing such a UBI could reduce the number of work hours by 20 to 30 percent, depending on the design, resulting in a substantial loss of state revenue.
"Introducing UBI at a survival-level wage would significantly diminish the incentive to work," explained study author Robin Jessen from RWI. "Due to the reduction in work hours, it is not economically feasible, even with significant tax increases."
Despite the proposed Universal Basic Income (UBI) simplifying the socio-economic system, the researchers warn that substantial tax increases would be necessary to cover the financial shortfall. The implementation of UBI at a survival-level wage, as suggested by its supporters, could lead to such significant tax increases that it becomes economically unfeasible due to the reduction in work hours.
