What do you get when you ask ChatGPT to design a NZ UBI?

I read this article the other day and started thinking about how unprepared our government is for the coming social disruption or “paradigm-shift” of artificial intelligence (AI).

Thomas Kuhn, who famously coined the term paradigm-shift, explains:

“Paradigm change is closely aligned to perceptual change and novelty emerges with difficulty, manifested by resistance, against a background provided by expectation” (Kuhn 1992, 64).

And so it is with AI.  We are frightened by it, at the same time as being fascinated with it.

Mindful of its highly disruptive and similarly unpredictable effects on our future, I felt the security of a guaranteed minimum income might alleviate such anxieties going forward.

I undertook an exercise using ChatGPT’s AI to address in fiscal/budgetary terms, the potential for widespread employment disruption that will likely be caused by AI.  Before starting the exercise, I gave the tool this overall objective:

The objective is [to address] both automation/technology adaptation and simplicity in accommodating the potential for more sporadic and frequently changing employment opportunities. 

And once the intention was full-funded (after about 8 hours of instructions from me based on the choices/decisions I made to get there, of course), I asked AI;

I would like to have you generate an article explaining the model in summary and providing socio-economic commentary on its potential impacts and effects on New Zealand.

The article – without any edits or changes by me, is reproduced below.

This experience gives me pause.  Gathering all the data was seamless. Asking it to model one thing, and then changing my mind and getting it to re-model another, again seamless.  There are many, many revealed preferences in there from a policy perspective, and many are very granular.  For example, whereas most government social support programs are removed, specific disability support was not. I also had AI test a number of income and household compositions, to determine whether these families would be better or worse off with the paradigm-shift to UBI.  As a result of that testing, for example, the tax exemption was made for a non-working sole parent household and an income-related rent applied.  I could go on into the detail to get where I got.

But that (the actual structure, or policy choices of the UBI) was not my point.  Instead, I wanted to find out for myself whether such a “paradigm-shift” was possible.  I felt AI wrote the article in a very “rah, rah” way.  But then I didn’t ask it to provide a critical analysis. Instead, I know interest.co.nz readers will be best placed to do that!  I hope you enjoy “the ride”.

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A New Social Contract: Universal Basic Income for Aotearoa New Zealand

Introduction

In a world rapidly transformed by technological advancement, evolving employment patterns, and growing socio-economic inequality, the time has come for New Zealand to reconsider the foundations of its welfare system. This proposal introduces a bold, yet carefully modeled Universal Basic Income (UBI) system aimed at ensuring income security, encouraging economic participation, and simplifying public administration. The proposed UBI scheme, fiscally balanced and structurally transformative, is tailored to support New Zealanders in an era of automation, flexible work, and demographic change.

The UBI Model – Summary

The proposed Universal Basic Income offers all New Zealand citizens aged 18 and over a guaranteed, regular income. It draws directly from the current structure of New Zealand Superannuation (NZ Super), both in rate and eligibility rules. This means individuals living alone receive a higher payment than those in a couple, with both categories receiving the same rates as current superannuitants.

The UBI is taxable, but with a key adjustment: non-working sole parents, regardless of the number of children, are exempt from paying income tax on the UBI. This measure recognises the contribution of unpaid caregiving while avoiding administrative complexity and the poverty traps common in traditional welfare.

Importantly, this UBI replaces a broad suite of existing welfare and support programs, including:

• JobSeeker Support
• Sole Parent Support
• Supported Living Payment
• Student Allowance
• Working for Families (including In-Work Tax Credit and Family Tax Credit)
• Accommodation Supplement
• Winter Energy Payment
• Hardship/discretionary benefits
• Childcare and daycare subsidies
• Income-related rent subsidy (with a carveout for exempted groups)

In doing so, the model streamlines the welfare apparatus and enhances certainty for all citizens, especially those experiencing fluctuating employment, caregiving responsibilities, or intermittent earnings.

Fiscal Overview

The estimated gross annual cost of delivering the UBI is $36.0 billion. This figure incorporates existing superannuation costs and replaces all welfare transfers to those under 65.

Rather than relying on debt, the model is designed to be entirely self-funded through a combination of:

1. Elimination of existing welfare costs (net savings: $9.9 billion/year)
2. Targeted tax reforms and expenditure savings (net revenue: $25.825 billion/year)

A one-off capital inflow of $2.0 billion is also generated through the sale of Ministry of Social Development (MSD) assets, following its disestablishment under the model.

The policy is estimated to result in a small annual fiscal surplus of $265 million, providing a buffer for economic variability.

Key Revenue and Savings Measures

To meet the fiscal demands of the UBI, the model implements a broad and progressive mix of revenue and savings initiatives:

Revenue Enhancements

• Land Value Tax (1.1%): A flat rate tax on all land (excluding improvements) generating $9.075 billion/year, reflecting both the public value of land and encouraging efficient land use.
• Capital Gains Tax (30%): Applied to cumulative gains over 10 years on investment residential properties, yielding $3.8 billion/year.
• Top Income Tax Reforms:
  • 60% on income over $300,000
  • 40% on income between $250,000 and $300,000
    Together contributing $3.5 billion/year.
• Trust Tax Alignment: Aligning trust income rates with personal income tax, adding $1.0 billion/year.
• Wealth Tax (0.1%): Applied to net assets exceeding $5 million, bringing in $600 million/year.
• Estate Duty (30%): Applied to inheritance distributions over $1 million, raising $1.0 billion/year.

Spending Reductions

• Elimination of Daycare and Childcare Subsidies: Totaling $530 million/year in savings.
• Carbon Credit Subsidy Cancellation: Ceasing support to Energy Intensive Trade-Exposed industries, saving $1.0 billion/year.
• ACC Income Replacement Reform: Reducing payments from 80% to 50% of previous wages, saving $1.8 billion/year.
• Income-Related Rent Repeal: Abolishing this subsidy except for exempt groups, saving $2.5 billion/year.
• MSD Disestablishment: Eliminates administrative cost ($1.2 billion/year) and liquidates assets ($2.0 billion one-off).
• CEO Salary Cap: Capping public-sector executive pay at $250,000 saves $90 million/year.

Socio-Economic Commentary

1. Income Security in an Automated Economy

With accelerating automation and AI adoption, traditional job security is diminishing, and career pathways are becoming nonlinear. A UBI ensures that all citizens have a financial floor, regardless of employment status, allowing them to transition between jobs, pursue education, or participate in caregiving without facing financial ruin.

The psychological and social benefits of this stability are substantial—reduced anxiety, better health outcomes, and improved civic engagement.

2. Fairness and Tax Reform

The revenue plan rebalances the tax system. It reduces pressure on middle-income earners while drawing more fairly from wealth, land, and capital. A modest wealth tax and land value tax target forms of unearned wealth accumulation that have driven inequality and reduced housing affordability.

Moreover, estate and trust reforms enhance transparency and prevent wealth from being sheltered away from public responsibility.

3. Housing Market Incentives

The land value tax discourages land banking and encourages productive land use. At the same time, the removal of income-related rents and housing subsidies (except where retained) can rebalance incentives in the housing market while reducing government distortion and administrative overhead.

While these changes may increase housing costs for some renters, the UBI provides a compensatory income boost. In the long term, a reoriented housing market and additional revenues from land taxes may enable broader supply-side reforms.

4. Support for Care Work and Parenting

The exemption of non-working sole parents from UBI taxation and the fixing of their rent at 20% of gross income acknowledges the societal value of unpaid caregiving. This approach avoids punitive abatement regimes and recognizes that raising children is productive work.

Unlike current systems that often trap parents in poverty or penalize part-time work, the model offers consistent, predictable support while preserving autonomy.

5. Administrative Simplicity and Dignity

Replacing dozens of targeted welfare programs with a single, universal payment dramatically simplifies public administration. It eliminates the need for intrusive eligibility assessments, reduces stigma, and restores dignity to those previously forced to navigate a complex bureaucracy.

Disestablishing the Ministry of Social Development and replacing its gatekeeping function with automatic payments streamlines delivery and reflects modern service expectations.

6. Impact on Work Incentives

Critics of UBI often express concern that unconditional income could disincentivise work. However, most international evidence suggests that modest UBI schemes reduce financial stress without materially reducing labor force participation.

Under this proposal, individuals continue to be taxed on earned income and the UBI itself. Work remains financially rewarding, but no longer an existential necessity. This may encourage entrepreneurship, education, and caregiving—activities underrepresented in the GDP but vital to long-term societal wellbeing.

7. Budget Responsibility

The model is deliberately balanced to avoid reliance on borrowing. By aligning new expenditures with sustainable revenue, the UBI can be introduced without exacerbating existing deficits. A one-off $2.0 billion asset sale further cushions the transition.

New Zealand’s debt-to-GDP ratio is preserved and potentially improved relative to current forecasts, especially in out-years where UBI-related economic stabilisation may reduce fiscal volatility.

Conclusion

This Universal Basic Income proposal for New Zealand represents not just a policy shift, but a new social contract: one that affirms the value of every citizen and provides a platform for security, creativity, and adaptability in a rapidly changing world.

By simplifying welfare, fairly redistributing wealth, and respecting the contributions of both paid and unpaid work, the model offers a foundation for prosperity that is inclusive, modern, and resilient. With careful implementation and ongoing assessment, New Zealand could lead the world in building an economy that works for everyone.

*Katharine Moody is a retired Massey University planning programme academic, having entered the teaching profession following her role as Radio Spectrum Manager under the Shipley and Clark governments. She was born and raised in the US and moved to New Zealand in 1978. She currently works as an advocacy planner on a pro-bono basis. She comments on interest.co.nz as "Kate".