Dr Gilad Isaacs presented Progressive Tax Reform for a Universal Basic Income at an ASSAf webinar on “Financing and Funding Options for Social Protection in South Africa”. The presentation examines how progressive tax reform can help finance a Universal Basic Income Grant (UBIG) while strengthening social protection and advancing economic justice.
Financing a Universal Basic Income
The presentation argues that UBIG financing should draw on a combination of mechanisms rather than a single source. Key considerations include whether funding should be ring-fenced or treated as general revenue, the distinction between gross and net costs, and the importance of transparent and effective public spending to maintain social legitimacy.
UBIG costs vary substantially depending on eligibility and benefit levels. Scenarios examined include monthly grants of R2,846, R3,500 and R4,500, alongside different poverty-line thresholds for adults aged 18–59.
Progressive tax reform
A proposed Social Security Tax (SST) uses differentiated rates across income brackets, increasing revenue while ensuring lower-income earners can remain net beneficiaries. The presentation also considers removing selected tax breaks, including retirement contribution deductions and medical aid tax credits for higher-income earners.
Other progressive options include wealth and property taxes targeting the wealthiest households, higher estate and dividend taxes, and reforms to corporate tax incentives.
Broadening the tax base
Transaction taxes on currency and securities, alongside a financial transaction tax, could generate additional revenue while addressing speculative activity. Luxury VAT and carbon taxes are also considered, although implementation and economic impacts require careful assessment.
Social and economic benefits
UBIG financing should account for benefits beyond direct income support, including poverty reduction, local economic stimulation, human capital development, gender equity and wider economic multipliers. In highly unequal economies, cash transfers can generate significant economic activity by increasing household purchasing power.
Conclusion: Tax reform for economic justice
Financing social protection ultimately reflects choices about fiscal priorities and distribution. Progressive taxation, improved spending quality and stronger economic growth can create sustainable fiscal space for UBIG while reducing inequality and advancing economic justice in South Africa.
Watch the recording of the presentation by Dr Gilad Isaacs below: