Popular measure - rising the taxless income
So-called helicopter money is seen as one of the so far only theoretical financing methods - the central bank's seeding of money directly to citizens instead of commercial banks. If this way of financing turns out to be possible, the implementation of the citizen's wage should not result in the need to raise taxes.
According to skeptics, the seeding of money can fuel price increases "if no new values are created". At the same time, the emergence of such a situation is unlikely, considering the competition, the preservation of people's price sensitivity and even the continuous creation of various "startups". If there are consumers, the creator of new values will receive income, which will be added to the income received "just like that" and, if successful, will exceed it many times over. It should not be forgotten that the amount of "helicopter money" is limited not only by the number of residents (citizens), but also by the volume and composition of basic benefits.
Lobbying for helicopter money is taking place in the European Union anyway. In the direction of the European Central Bank, for example, PositiveMoney, an association operating in France, deals with this.
Possible unpopular measure - rising of taxes
It seems to be clear that the appearance of UBI and rising of tax-free income part will need a rising of some tax percentages as well. In may concern in first order the personal income taxes. Althought people with low incomes may not even feel the change, the reaction may be negative, at least in beginning.
Alternatives - Negative Income Tax or tax credit
Technically different, but with the same parameters, alternatives to the UBI are the negative income tax and the so-called tax credit. In addition to tax reform (and simplification of the tax system), either solution of the guaranteed minimum requires a technical reorganization of the redistribution system.
In the event of a negative income tax, the state pays proportionally more money to the recipient of gross income below the tax-free limit. Ideally, a uniform tax rate will then apply. If a person does not receive taxable income at all, the state receives the part of the tax-free limit corresponding to the tax rate. For example, if 1,250 euros per month is tax-free and the income tax rate is 40%, the non-recipient of the income will receive 500 euros from the state, while a person with a gross income of 1,200 euros will receive 20 euros. From 1300 euros, 20 euros goes to the state.
A similar solution to the above in the form of a tax credit works as follows. The redistribution system calculates a person's nominal income tax based on their income and subtracts the tax credit from it. If the difference is negative, the difference is transferred to the person, if positive, to the state. Using the above sample parameters - a tax credit of 500 euros is subtracted from the 40% income tax. If there is nothing to withhold income tax, the person gets the entire tax credit. If the gross income is 1200 euros, the nominal income tax is 480 euros, but it stays with the person and he gets another 20 euros for himself (480 - 500 = -20). However, in the case of a gross income of 1,300 euros, 20 euros go to the state.
The principle of "diminishing support", similar to the negative income tax, has been tested in experiments in the 1970s in the USA and Canada and also used when the "stimulus checks" were introduced in USA due to the Covid crise. The tax credit solution was discussed in the French parliament in 2021, while the autonomous Corsica hoped to organize an experiment in this regard on the island as a whole, using an already functioning redistribution system (with a tax rate of 35%).
