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Proposal for a European
Basic Income Allowance (BIA)
A European Basic Income as a solution for the social
unification of Europe
Marc A. Meuris
21-jun-2008
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Introduction
• EU in past 50 years: economical and financial
unification led to a successful implementation
of an unified economy (global EU wealth
creation, i.e. “baking of the cake”)
• Need: a social Europe with an unified social
security system (global EU wealth distribution,
i.e. “eating of the cake”)
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Challenges next decades
• Gradual increase of extreme poverty
• Gradual shift of income from wages (labor
income) to income from capital investment
(financial income)
• Increasing amount of elderly people (need for
more pension and health funding)
• Environmental friendly economy (not discussed
here)
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Assumptions for EU social system
• Unified system: easy to implement for all EU citizens
and easy to transfer when citizens move inside EU
• Reduce extreme poverty
• Reduce “social security trap” of present social security
systems.
• 100% employment will never be reached
– There are people who are unable to work
• Income from capital investment should equally
contribute to the social system: Social security funding
is now mostly paid from taxes and contributions on
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wages and therefore designed to destroy jobs
Basic Income Allowance: BIA
from Basic Income Tax: BIT
• “40/30 proposal”: minimal social protection in EU
– BIA: Give every EU citizen an equal share of 30% of the total
income (= GDP of EU)
– BIT: 40% flat tax on each income, independent of the type:
salary or other income (profit on savings is also an income)
BIT = 40% of GDP of EU
• 30% used for social security system (BIA = 3/4 of BIT)
• 10% of income for government administrations (1/4 of BIT)
• Note: No tax on capital itself, only on profit from capital
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Note: PY= Person . Year
KPI = Key Performance Indicator
Basic Income Allowance: BIA
• BIA = 30% of GDP/person in the EU = 7,000 EUR/PY
• Every person will receive BIA, independent of income
• To start the system: differentiate between EU regions
based on local Purchase Power Standard (PPS)
– e.g. Belgium 9,000 EUR/PY - Hungary 4,000 EUR/PY
– Yearly adapted to local PPS. Regional differences will level
out when economies in EU grow to each other
• End goal: one unique BIA amount in the EU
– This would be a success criterion (KPI) for a social Europe
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BIA replaces all EU social security (1)
• BIA = basic needs of one person
– Food, clothing, housing, basic health care
• Income from work or capital investment
– 40% flat taxed
• Additional tax break on income for promoting
mortgage on first house, private health insurance and
private pension fund
– People with income can built-up additional insurance
• Extra social funding can be given by local authorities
from local taxes
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BIA replaces all EU social security (2)
Limited difference with existing social benefits
• BIA = minimal social protection in EU (see next 6 slides)
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Replaces progressive tax level with higher income
Replaces minimal unemployment allowance
Replaces minimum allowance for poor families
Replaces sabbatical periods for education of children
Replaces school tuition for children (educational support)
Replaces legal pension
Replaces all other social benefits (e.g. social reductions)
• Similar level as existing social and tax funding, easier to control
• Extra social funding for employees can be negotiated with
employers (e.g. by unions) per economical sector
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BIA replaces all EU social security (3)
E.g. progressive tax level
• A flat tax on income combined with a basic
income serves the same purpose as a
progressive tax on higher income
• It is easier and more just. Every person (also
w/o income) will at least get its basic needs
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BIA replaces all EU social security (4)
E.g. unemployment
• The “40/30” proposal replaces the minimal
legal unemployment funding and avoids part of
the extra cost on controls
• Additional support for dismissed employees
based on negotiations of unions in an certain
economical sector are still possible
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BIA replaces all EU social security (5)
E.g. poor families w/o income
• When a family can prove nobody is able to
work due to physical, health or mental problems
and has no other means to survive most states
provide funding presently
• The “40/30” proposal replaces this completely
and less cost on controls will result
• Note: BIA proportional with # persons/family
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BIA replaces all EU social security (6)
E.g. Sabbatical periods
• The “40/30” proposal will ensure a minimal
income when people decide for a sabbatical
period (for raising children or helping old
parents, etc.).
• No control and approval needed from a political
level like present funding of sabbatical periods
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BIA replaces all EU social security (7)
E.g. School tuitions
• Also each child will receive this BIA
• Until a certain age (e.g. 18 years), part of the BIA has to
be used obligatory for schooling
• If extra-tuition on top of BIA is needed (e.g. for higher
education >18 years): make it tax deductible
• Most EU countries provide almost “free of charge”
schooling. This system can be sustained and the cost
will be deducted from the child’s BIA
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BIA replaces all EU social security (8)
E.g. legal pension
• BIA replaces the legal pension
• Legal pension will become dependent on global
economical performance of the EU and becomes
budget neutral for governments within the fiscal year
• Additional tax-breaks on income should be provided to
promote self-savings for individual extra-pension
• This allows the possibility to abolish the “legal pension
age” (BIA is independent of age). It allows people to
reduce their work gradually from a self-chosen age
• Increasing amount of elderly people becomes payable
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Practical implementation (example)
Best practice of BIA, not necessarily money transfer
E.g. Belgian BIA proposal = 9,000 EUR/person
Present Belgian social system provides free of charge:
• school cost = ~7,000 EUR/child
• basic health insurance = ~1,000 EUR/person
Practical BIA proposal in Belgium could become
• BIA/adult = 8,000 EUR + free basic health insurance
• BIA/child = 1,000 EUR + free basic health insurance
+ free school
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40/30 proposal is economically viable 1
• Social allowance follows economical growth (or
recession) of incomes, independent of income type
– No governmental budget problems compared with present
fixed amounts for social security funding. It is budgetary
neutral within a fiscal year
– No reduced PPS for social benefits compared with present
practice of fixed amounts. It is automatically adapted to global
income changes
• Amount of BIA = basic needs of a person
– Total amount of BIA will return in the market economy
(because it matches the basic needs) and will stabilize the
consumer demand: demand is the engine of market economy16
40/30 proposal is economically viable 2
• Flat tax is equal on all incomes
– In the present situation, tax on income from savings or
capital investment is lower than tax on wages. Moreover,
social security is mostly paid from contributions on wages
– But an increasing production efficiency of companies (driver
of profitability of companies) leads to lower wages and
higher income on capital investment. Presently it leads to
lower contributions to the social security.
– The “40/30” proposal solves this completely. Social security
is paid from all incomes. The BIA is only dependent on the
global economical health of the EU. It is an enabler to get a
buy-in from a large audience for the present successful EU
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market economy
BIT / BIA benefits
• Solution for social security trap
– Every income will keep 60% of each euro earned
– For low level jobs, no punishment when earning just above a limit where
no or reduced social allowance is entitled (present situation)
• Solution for older people in society
– BIA is legal pension
– Additional private savings (tax-deductible) for additional pension
– No pension age: gradual decrease of work if wanted
• Solution for social security policy
– Target for social funding level for governments (30% of GDP)
– Social funding is dependent on GDP (i.e. the economical health)
– Redistribution of income will enhance social cohesion
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