Abstract
This chapter addresses the cost objection to basic income, which rests upon the claims that (a) it is too expensive to implement and (b) that personal income taxes will have to be raised to such a high level as to make it politically infeasible. A Canadian case study is used to demonstrate that the cost savings of implementing basic income are often greatly underestimated or neglected, and that personal income taxes do not need to be raised. Personal income taxes could be reduced while implementing a decent basic income.
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Notes
- 1.
BC Teachers’ Federation, “Historical Perspectives: The Canadian Centre for Policy Alternatives”, January/February 2007 https://www.bctf.ca/publications/NewsmagArticle.aspx?id=10456.
- 2.
Also, Canada’s underground economy is valued at over $40 billion annually, not including illegal activities such as drug trafficking and prostitution, with construction, finance, real estate, rental and leasing and holding companies making up the largest components of this unrecorded trade according to Statistics Canada (2014).
- 3.
Thirty percent of $286 billion.
- 4.
Clawback or supplemental tax back rates applied to UBI are not included here, and provide much higher net cost savings than 30%. Increasing amounts and forms of unpaid labour internationally (Perlin 2012; Pereira 2009) are also a problem UBI can mitigate, helping make currently unpaid (or underpaid) labour paid (or fairly paid) and thereby increasing personal income and income tax revenue. Other forms of taxes beyond income taxes are not taken into consideration by Young and Mulvale’s footnote comment, which includes increased consumption and other taxes when people have a UBI as opposed to much smaller – or no – income currently. VAT rates in Europe are regularly well above 20% (European Commission 2014: 3). Combined federal and provincial sales taxes in Canada are usually between 12 and 15% (Munroe 2013).
- 5.
Yalnizyan is referenced at the end of a CCPA article citing the $380 billion annual cost amount by a member of the CCPA (her own organization) by way of an update to the article in the “responses” section on March 3, 2014, and Yalnizyan points to Kesselman’s work for justification. See Shaun Loney, “A Province with No Poverty,” Policy Fix, CCPA-MB, February 28, 2014: http://policyfix.ca/2014/02/28/a-province-with-no-poverty/; Also, Reddit Canadian Politics, “I Am Armine Yalnizyan, Ask Me Anything,” reddit.com, March 1, 2014: “I’m not a big fan of the minimum income a) huge cost…$380B for a liberating level of guaranteed annual income according to SFU economist Rhys Kesselman…I strongly recommend Rhys Kessleman’s [sic] work on the guaranteed income”. Yalnizyan provides a link to the same Kesselman Inroads Journal article cited in this chapter. In discussions with Glen Hodgson and Andrew Coyne, Yalnizyan reaffirms her support of Kesselman’s work as the main objection to GAI/basic income (available online, February 1 2014, “I’m in Kesselman’s camp on GAI”).
- 6.
And as we have seen with poverty-line income statistics (i.e. LICO) many multiple-person households will be far ahead of household poverty lines if recipients have an at-poverty-line UBI distributed per individual, because combined income households can extend incomes further. For example, a doubling of rent, mortgage or living space is not required if adding a second person to a household.
- 7.
“Governments rely on a regressive tax structure as a source of public revenue. (Regressive taxes are those that take away a higher proportion of income from the low-income groups than from the high-income groups.)” Quote from Canada, Croll Report (1971: 46, or p. 74 of 241 in available online versions of the Report). Numerous examples are given in the Croll Report of regressive taxation, many of which have been exacerbated since its publication decades ago.
- 8.
- 9.
As explained in the Financial Post (Heath 2011) “Rental real estate has been described by some as the equivalent of a super-charged RRSP”.
- 10.
There is no justification for unearned income to be taxed at a lower rate than earned income, and capital gains (outside of RRSPs) achieve this through a legislated 50% “inclusion” rate. This means only 50% of capital gains are subject to tax. This legislated limit has changed several times and was set at a 75% inclusion rate in Canada for a period in the 1990s (CBC 2012). All capital gains/unearned income should be treated as earned income is, that is, without special exclusions, and that is how I have treated capital gains with the removal of the RRSP programme. Sale of a principal residence is one exception where all capital gains taxation is excluded. There are certain lifetime capital gains exemptions whose existence and/or threshold amounts can be questioned, with additional revenues from such reduced exemptions being better directed universally to UBI. Overheated, volatile and sometimes corrupt stock markets and the companies in them should not be receiving such additional government promotion and incentives to encourage investment in them.
- 11.
Eliminating the RRSP programme provides additional forms of government savings not explored here, representing additional revenue for UBI. For example, special RRSP tax credits for labour-sponsored investment funds means that each level of government provides an additional 15% in tax deductions (30% extra deductions from federal and provincial governments combined [FTQ 2014]). For each $1,000 invested your “investment only costs you $320!” as per the FTQ promotion. Labour-sponsored funds and associated organizations have been involved in major corruption probes in more than one province (Canadian Press 2014; Hopper 2012).
- 12.
Writing about one category of tax shelters (not including RRSPs, TFSAs, RESPs, real estate, etc.), a tax lawyer specializing in non-profit and charity law states that philanthropic schemes “costs the Canadian governments billions of dollars per year” in tax incentives and tax receipts (Blumberg 2007).
- 13.
If $132bn savings identified in Young and Mulvale’s proposal is added to the $181bn in missed savings identified in this chapter, then Kesselman’s less generous model of UBI is reduced in cost by $313bn, or 89%.
- 14.
Putting children on a lower priority than that of servicing 24-hour/overnight gamblers represents an ethical new low, with government as facilitator of this anti-social conduct on both counts – providing the casinos (which many jurisdictions reject as anti-social) and then further enabling addictive gambling behaviour by removing/treating children as obstacles and placing them in government-run “care” institutions. This is about as far from “care” (day, night or otherwise) as I have seen the term used. It is an abusive use of language and the comprehensive concept of care.
- 15.
Mario Régis, head of the association of non-profit day care centres in Montreal, asks “How far do we want to go? We have to avoid a situation of abuse…children need their parents above all.” He also points out the potential for employer abuse using these programmes to “take advantage of staff” (Peritz and Gagnon 2000).
- 16.
The number of Canadians working “at two or more jobs or businesses almost quadrupled (from 208,000 to 787,000), compared with overall employment growth of 61%” from 1976 to 2003 (Statistics Canada 2004).
- 17.
This is compounded by an extremely weak enforcement regime when it comes to workplace standards violations in Canada (Federal Labour 2006: 192–93, 220–21; Pereira 2009: 55–59). Pigg writes that the “stunning” increase in firings of pregnant women across Ontario is happening in all sectors and human rights advocates claim they have not seen this level of discrimination in two previous recessions and 30 years in the human rights field.
- 18.
This reference [online] is not officially dated; however, it cites “Results of a national survey on housing conducted October 18–22, 2013.” Accessed 22 May 2014.
- 19.
Also see Investment in Affordable Housing for Ontario: Program Guidelines, August 2011, 20 (available in the CMHC source above). This money could be directly provided to Canadians as additional funding to UBI so that they could build their own homes, find their own existing homes for purchase or rental options without the restrictions of local and provincial housing authorities and their sometimes corrupt, expensive bureaucracies (Section 2, Subsection “Third Response: Freedom from Bureaucracy” will detail some of this corruption).
- 20.
“Welfare programs don’t have to remain as they are: they can be made less parsimonious…” (Kesselman 2013: Sect. 1). “For employable people on welfare, particularly singles, benefits are miserly to the point of almost requiring beggary and thievery for bare sustenance. These welfare benefits need to be increased…” (Kesselman 2013: Sect. 7).
- 21.
For an explicit real-life example of how the existing welfare patchwork constantly creates new hardships for those caught in its numerous programmes (welfare, social housing and rent supplements, OSAP student loans, etc.), see Laurie (2008: 29–30).
- 22.
Worth up to $500 each year for seniors 64 years of age or older who own a home in Ontario (see www.fin.gov.on.ca/en/credit/shptg/). This particular programme is an example of one that may justify partial redundancy with a UBI in place, whereas many other programmes justify full redundancy/elimination with all savings directed to UBI instead.
- 23.
Adding a “clawback” to UBI can make the demogrant version even more similar in cost to the NIT version, depending on what rate the clawback is set at. Since there is such a large surplus to work with, the clawback could be set at a relatively low rate and still achieve a large surplus of public funds by implementing a UBI demogrant.
- 24.
From their list of $132bn in savings I would start by removing the $14bn item for EI as discussed earlier (Subsection “First Response: Savings from Replacement of Existing Income Security Programmes”), as this programme should be retained as a contributory scheme. This would result in $118bn in savings from Young and Mulvale’s figures, against a cost of $21.5 billion for UBI (NIT version), totalling $96.5bn in savings/surplus from implementing UBI.
- 25.
Health care bureaucracy is not affected in this discussion. Again, the commitment in this thesis is to high-quality publicly delivered health care, with no intention of moving in the direction of private health care delivery as is commonly associated with the US.
- 26.
“a damning report from the city’s auditor-general that uncovered lavish employee expenses [at TCHC – Toronto Community Housing Corporation]. That probe also found staff repeatedly single-sourced contracts, sometimes without appropriate documentation, or split orders in order to get around procedures that would require board approval for big ticket items.”
- 27.
Some anti-ecological activities such as nuclear power and its waste generation need to be banned outright, as several countries and other jurisdictions have already done. Many toxic chemicals are also not needed in food or other products – organic food production could be pursued much more actively. However, destructive mining activities to produce luxury items and many other unnecessary consumer goods, for example, should have much higher prices attached to them to reflect this ecological harm, if local communities have accepted the mining activity. Excessively large vehicles (SUVs), sports vehicles (cars, boats, etc.) simply purchased as status items and burning excessive amounts of fuel are additional examples of items that should have a much higher “true-price” for the damage they cause to the commons and greater amount of resources required in their production, if society is to continue to accept their proliferation.
- 28.
For additional support on this point see Pasma and Mulvale (2009: 2) in which they state: “Although the cost for the government’s budget is greater than with an NIT, the end cost to taxpayers is not necessarily higher, since those with higher incomes pay the benefit back through their taxes. As well, the program may be cheaper to administer than an NIT because of the greater simplicity of its administration.”
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Appendix – Missed Savings and Redundancies in the UBI Cost Objection: A Summary
Appendix – Missed Savings and Redundancies in the UBI Cost Objection: A Summary
Young and Mulvale (2009) cost a “generous” UBI – enough to raise all Canadians out of income poverty – at $418 billion annually and find savings of $132 billion (leaving the Canada Pension Plan/Quebec Pension Plan untouched). This provides a net cost of $286 billion annually in their study, leading them to conclude UBI is financially out of reach. Kesselman (2013) costs UBI at $350 billion and provides no savings figures. Here are missed savings items that these studies failed to consider or cost to reduce the net cost (and even provide a surplus) for UBI. This is a summary of what is detailed in this study with a few additional items for consideration marked with an asterisk:
Item or programme | Missed savings (billions) | Missed savings subtotal |
|---|---|---|
Additional tax revenue generation (at prevailing rates) | $86 | |
RRSP | $36.3 | $122.3 |
TFSAs | $3 | $125.3 |
Other tax shelters | $3 | $128.3 |
Cost of poverty | $53 | $181.3 |
Day care – partial redundancy | $9 | $190.3 |
Social housing (and related programmes) – partial redundancy | $4 | $194.3 |
Additional income assistance/welfare advocated in the cost objection (to status quo programmes) | $16 | $210.3 |
WITB (EITC equivalent in the US) | Not costed1 | |
Special public employment projects advocated in the cost objection | Not costed | |
Homeowner’s Property Tax Grant | Not costed | |
Charitable tax deduction programmes and government grants (food banks, poverty alleviation) | Not costed | |
Corporate welfare-subsidy programmes | Not costed | |
Sunshine list of excessive/high salaries in the public service* | ||
Total missed savings/redundancies | $210.3 | |
PLUS: tax leakage – current system | ||
Offshore tax havens/related evasion and tax avoidance | $40 | $250.3 |
PLUS: bureaucracy savings | ||
Welfare elimination, social housing reduction, day care reduction, OSAP, etc. | Not costed | $250.3 |
PLUS: externalities/current free-riding | ||
Social-labour dumping, health costs | $22 | $272.3 |
Green dividend/carbon fee | $60 | $332.3 |
Tobin tax and/or variations at the national level (financial speculation levies) | Not costed | |
Land speculation levy | Not costed | |
Taxing unearned income at the same rate as earned income* | ||
Total missed savings, tax leakage (in current system) and new revenue from pricing externalities | $332.3 |
Adding this missed savings total (preventing externalities can also be considered savings, as this reduces public costs) to existing savings identified in Young and Mulvale (2009) of $132 billion, totals $464 billion in savings to be gained by implementing UBI.
Many items above have been costed partially or conservatively as explained throughout the chapter, leading to a greater potential for savings/surplus as a result of implementing a decent UBI. Several items have not been costed, leading to even greater savings than what is presented here.
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Pereira, R. (2017). The Cost of Universal Basic Income: Public Savings and Programme Redundancy Exceed Cost. In: Pereira, R. (eds) Financing Basic Income. Exploring the Basic Income Guarantee. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-54268-3_2
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