Can We Afford A Basic Income?

1. The Cost of Poverty

We currently spend a lot of money dealing with the results of poverty, here in Alberta and across Canada. The costs of healthcare, corrections, housing and justice that can be attributed to poverty alone, range from $72 - $86 billion every year. In Aberta alone, the yearly costs of poverty are between $7.1 & $9.5 billon.

Though a basic income alone would not completely solve poverty, it would provide a substantial reduction, and thus a substantial reduction in these costs. If a basic income reduced the costs of poverty across the country by $60 billion, that’s effectively $60 billion that can go towards paying for the program. 

Basically we’re either paying money to reduce poverty in the first place, or to mitigate the damage after the fact. Paying money upfront to reduce poverty results in better health, better educational outcomes, reduced crime, and more people spending more money in their local economies. This has all been proven by a number of studies here, here, here and elsewhere. When we pay to mitigate the damage caused by poverty, we don’t change any of these things for the better. No one gets lifted out of poverty, health outcomes don’t improve, food security does not improve, crime does not go down and the economy doesn’t change.

So we could spend that money either on the status quo, or on better lives for millions of Canadians.

 

2. The Tax Gap

The ‘Tax Gap’ is the amount that Revenue Canada estimates that they are not able to collect due to tax evasion, tax-payer error and unpaid liabilities. The Canadian tax gap is estimated to be around $8.7 billion per year for individuals, and $11.4 billion per year for corporations. And 75% of Albertans support closing tax loopholes to help pay for a basic income. That’s another $20 billion per year that could go towards improving the opportunities available to Canadians who are experiencing food insecurity, or are trapped in poverty.

 

3. Tax Revenues

Note we didn’t say ‘increased taxes.’ A portion of basic income would end up coming back to government coffers in a number of ways.

First of all, a basic income would be taxable. That means that wealthy Canadians who don’t need it might have it all taxed back. Canadians who make an average income could have part of it taxed back, and only those who need it all would keep it all. This reduces the costs of the program, and if it was simply tied to annual taxes, does not add any administrative costs. It’s simply one more line on your tax return.

Secondly, a basic income would allow for more participation in the work force. Many families end up having one parent stay at home to deal with childcare, because the cost of childcare is so high, it cancels out the second income. More participation in the work force increases tax revenues without increasing the tax rate.

Thirdly, a basic income would simply create more spending. Spending boosts an economy, and if we ever needed economic boosting, now is the time. It also helps keep money within your area. If you are pinching every penny, most spending is done at internationally-owned businesses, because they offer the cheapest (and lowest value) products and services. Having more purchasing power creates more choice in spending, and more dollars end up getting spent in local businesses, increasing their revenues, stimulating the economy and increasing the total tax revenue. It's people spending money that drives an economy.

 

4. Income Support Program Mix

Basic Income could also provide an opportunity to restructure other income support programs. Rather than continuing to increase the number of support programs that Canadians already access, some of them may be able to be folded into a basic income program. In these instances, basic income would not be an additional cost, but rather a different means of distributing money already being spent. 

 

5. Basic Income Scope

There is also the possibility that certain programs that already exist wouldn’t change, and therefore, the individuals receiving support through those programs might not need a basic income at all.

There is much debate about how basic income might fit into the mix of social support programs. But let’s assume for a moment that it doesn’t replace either Old Age Security (OAS) or the Child Benefit and therefore isn’t paid to seniors or people 17 and under.

Within the next decade or so, 1 out of 5 Canadians will be seniors. If seniors stay on OAS and don’t receive basic income, that drops the cost of the program by 20%.

Almost the same savings apply if we don’t replace the Child Benefit with basic income. Approximately 19% of Canadians are 17 and under.

All told, if basic income isn’t applied to seniors or children, it reduces the cost of the program by almost 40%.

Another potential idea is reducing the amount for additional people in a household. Every dollar of reduction for a second person in a family is a dollar of reduction of the program cost.

We also don’t have to worry about major costs to set up a basic income program. Though some adjustments would have to be made to the tax code (which is already done quite often), thanks to CERB we already have a method in place for distributing it.

 

6. Reduction of Red Tape and Administration

Our social safety net is complex — and many would say it’s not working — with many hoops to jump through and a lot of administration necessary to execute. Although a basic income would not be able to replace our entire social safety net, it’s possible it could replace significant portions. This could reduce the size and cost of government somewhat, and those savings could be passed along to reduce the cost of basic income.