Costs could be between $131 to $464B–Fraser Institute
The idea of a universal guaranteed basic income (or universal basic income) has gained momentum during the pandemic. This comes as Canada’s federal government has instituted a number of emergency funding programmes to help individuals and business cope with losses due forced closures to prevent spread of the virus.
Even though the business and the economy have begun slowly picking up, the Liberal government has been openly musing about the idea. Canada has financial assistance programmes that cover certain life situations, such as the “welfare” or Social Assistance/Income Assistance programme, and Employment Insurance ( during job loss). In some respects a guaranteed basic income would be similar to the Canada Emergency Response Benefit (CERB), one of the federal government’s current pandemic emergency bridging programmes.
Also described as a guaranteed annual income (GAI), such a programme had been tested in Ontario under the province’s previous Liberal government, and although the pilot programme was limited, it appeared to be beneficial to the relatively small number of low income participants before it was cancelled by the incoming government.
Pope Francis in spring of this year expressed support for the idea of a universal basic income. (Vatican Media via Reuters)
On its website, a non-profit group called Basic Income Canada Network explains: “A basic income guarantee ensures everyone has an income sufficient to meet basic needs and live with dignity, regardless of work status”.
While there are many proponents of such a concept, a new analysis by the Fraser Institute, a conservativ-leaning public policy think tank, says it would be costly.
In its report, entited GAI: How Much Could A Guaranteed Annual Income Cost?, the institute lists four possible secarios for GAI.
It notes that if the Old Age Security benefit (currently given to eligible senior citizens) were extended to all citizens between age 18 to 64, providing an annual $7,272 in minimum income, the cost to taxpayers would be an estimated $131.9 billion.
On the other end of the scale, if the GAI were based on the current CERB model with a $2,000 monthly benefit to all eligible Canadians, it would double all current federal government programme spending, coming it at an estimated $464.5 Billion.
A separate Fraser study on the tax implications is called GAI: Illustrating the Tax Implications of a Guaranteed Annual Income.
As an example, it finds that Canada’s federal Goods and Services Tax (GST) would have to increase from the current five per cent to between 26.25 and 105.35 per cent to pay for a GAI depending on scenario. Another scenario deals with the suggestion that the “rich” should be taxed to pay for it, but the institute noted that, “If all the disposable income of those earning more than $250,000 were taxes, it would only cover 25 to 87 per cent of the total cost of a GAI”.
“If the federal government pursues a guaranteed annual income program, it will have to raise a staggering amount of revenue from taxpayers to pay for it,” said Tegan Hill, author of the tax report.
Jake Fuss, economist at the Fraser institute, noted, “These cost estimates are in addition to existing social programs like EI and welfare. There are many different potential models of GAI and we chose to calculate GAI as an add-on rather than a replacement.”
Another issue not raised in these reports but elsewhere notes that a guaranteed annual income would also have vary according to where people live as living costs between urban and rural communities is much different, notably due to housing costs, and–in fact–the cost of living varies greatly even among the major urban centres across the country.
It is not known what the Liberal government has decided regarding a guaranteed income, which, if adopted, would be presented in the throne speech on September 23. If there is no non-confidence motion at that time that would trigger an election, the Liberals would vote on the policy at their November party gathering.
additional information – sources
- Basic Income Canada Network
- Fraser Inst- GAI: How much could it cost?
- Fraser Inst- tax implications of GAI
- PostMedia: J Bryden:Sep 12/20: Guaranteed basic income tops policy priorities fro Liberal caucus
- CBC: E Dyer: Apr 19/20: From pipe dream to prospect: the pandemic is making a case for universal basic income
- TVO: J M McGrath: Sep 15/20: OpEd- Basic income would be the biggest reordering of public finance in a generation
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