Rather than replacing social security benefits with a universal basic income, Finland should look into removing income taxes for low-income earners, says Daron Acemoglu, a professor of economics at MIT. (Vesa Moilanen – Lehtikuva)

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DARON ACEMOGLU, a professor of economics at the Massachusetts Institute of Technology (MIT), has poured cold water on the rumbling speculation about universal basic income in Finland.

Acemoglu told Kauppalehti on Monday that it is absolutely foolish to view basic income as an alternative to job loss and sliding wages. The idea of universal basic income, he said, has arisen from two distinct sources: the political far-left, which has ignored its economic impacts, and the liberal right, which wants to employ it to eradicate the social safety net.

“In Finland, for instance, it’d mean a tax rate of about 65 per cent in relation to the gross domestic product,” the Turkish-born American economist stated to Kauppalehti.

Acemoglu, who is widely billed as a future winner of the Nobel Prize in Economic Sciences, stated that creating a basic income scheme by replacing some of the existing instruments of social support would be a foolish idea because such instruments benefit people in need of support. The basic income, he explained, would instead function as a subvention to millionaires, the employed and the unemployed.

He also identified taxation as a means to create positive effects without the negative effects of basic income.

“You shouldn’t tax earnings lower than 2,500 euros, for instance. That’d be cheaper than a basic income system and would hit the intended target: low-income earners,” elaborated Acemoglu.

In Finland, the income tax is not levied on annual earnings lower than 17,200 euros. Even low earnings, however, are subject to other taxes such as the municipal tax.

Aleksi Teivainen – HT
Source: Uusi Suomi