March 19, 2016


The Finnish Model : Helsinki prepares to give every citizen €800 per month and shut down its welfare bureaucracy. (Guy Sorman, March 18, 2016, City Journal)

The negative income tax is often associated with the free-market economist Milton Friedman, who defended it with passion and flair in the 1970s.

This year, the Finnish government hopes to begin granting every adult citizen a monthly allowance of €800 (roughly $900). Whether rich or poor, each citizen will be free to use the money as he or she sees fit. The idea is that people are responsible for their actions. If someone decides to spend their €800 on vodka, that is their decision, and has nothing to do with the government. In return for the UBI, however, the public accepts the elimination of most welfare services. Currently, the Finnish government offers a variety of income-based assistance programs for everything from housing to children's education to property insulation. Axing these programs should free up enough public resources to finance the UBI. The bureaucracy that currently governs welfare payments will disappear. There will no longer be any need to ask for government help, nor to fill out forms or wait for the competent authorities to examine each dossier to determine eligibility.

The introduction of a UBI should loosen the hold of public bureaucracy over Finnish citizens and reverse a century of top-down socialization in Finnish society. In practice, each citizen will automatically receive his monthly allowance and declare it as part of his taxable income. The poorest citizens--who do not pay income tax--will keep their entire allowance, while high-earners will repay a relative portion of their allowance in tax. As always, the devil will be in the details. It's still not known whether this allowance will replace every welfare program, or if some--such as those that aid the physically and developmentally disabled--will be maintained.

Remarkably, every major Finnish political party has signed on. The Left is cheered by the socialistic idea of government-assistance-for-all. The Right looks forward to the unprecedented drop in bureaucratic control over citizens, an unheard-of extension of freedom of choice, and an unconditional restitution of part of citizens' taxes.

The Finnish government is expecting the negative income tax to have a beneficial effect on employment and growth.

Posted by at March 19, 2016 8:36 AM