Expected Effects: Redistribution and Sustainable Efficiency

This chapter estimates the comprehensive socioeconomic effects of the proposed income security system, integrating a Common Wealth basic income, an NIT-type basic income, and a Universal EITC. Utilizing microsimulation analysis, the authors demonstrate that the proposed package will result in significant poverty alleviation and inequality reduction, with income inequality indicators like the Gini coefficient expected to improve to levels comparable to those of Nordic welfare states. The analysis indicates that nearly 70% of the population would emerge as net beneficiaries, ensuring broad-based support for the redistributive reforms. Crucially, the chapter addresses concerns regarding economic efficiency by analyzing changes in Participation Tax Rates (PTR) and Effective Marginal Tax Rates (EMTR). The authors argue that the reforms will promote “sustainable efficiency” and substantive freedom by lowering the prohibitive tax rates currently imposed on social assistance recipients, thereby minimizing negative impacts on labor supply. Furthermore, by shifting to an individual-based unit of payment, the proposal effectively eliminates the structural flaws of the existing welfare state, such as unfair income reversals, marriage penalties, and incentives for household dissolution, providing positive incentives for family formation.