Towards a National Universal Guaranteed Basic Income Harvey Stevens Wayne Simpson University of Manitoba 1

Hits of the 60s, 70s and 80s U.S. begins a series of Negative Income Tax experiments (NJ, Gary, NC, Seattle-Denver) as part of Johnson’s War on Poverty 1971: Special Senate Committee on Poverty recommends federal Guaranteed Annual Income following ECC Report on Poverty : MB and federal government jointly finance MB Basic Annual Income Experiment (Mincome) – RCT experiment in Winnipeg + Dauphin pilot 1985: Macdonald Royal Commission recommends Universal Income Security Program (and free trade) 2

Universal Income Security Program (UISP), 1985 Macdonald Commission recommended welfare reforms to improve social equity and economic efficiency Replace most existing income support programs with a guaranteed income program designed like a negative income tax 1)Guarantee adjusted for family size 2)Implicit (negative) tax or benefit reduction rate 3

Royal Commission on the Economic Union and Development Prospects for Canada, 1985, p.48 “The replacement of most of our current income-security programs and several of our tax exemptions and deductions would allow the Government of Canada to make available, in 1985, a basic income guarantee of $2750 per adult (and for the first child in a single-parent family) and $750 per child; benefits would be reduced at a rate of $20 for each $100 of other income. The elderly would receive an enriched option... It should replace the following existing programs: Guaranteed Income Supplement, Family Allowance, Child Tax Credits, Married Exemptions, Child Exemptions, the federal share of Canada Assistance Plan social assistance and, eventually, Federal Social Housing Programs. If the personal income tax exemption were also eliminated, the income guarantee could be raised to $3825 per adult per annum and $765 per child.” 4

80s and Beyond? Nothing like the UISP ever enacted Modest tax reforms have adopted the rationale of a benefit guarantee with a benefit reduction i.Guaranteed Income Supplement for seniors (1967) ii.Goods and Services Tax Credit (1991) iii.Working Income Tax Benefit (2007) iv.Canada Child Tax Benefit (2016) Taking stock: (1) Are we moving toward universality in income support? (2) What are the shortcomings of the current tax-transfer system? (3) What can be cone to overcome these flaws? 5

Assessment of Current Federal Income Support —Principles Horizontal Equity: Individuals with the same financial circumstance should pay the same Vertical Equity: Individuals with greater ability to pay should pay more (progressive taxation) Individuals literally or families? Marriage neutrality (marriage should not affect tax burden of two adults)? We focus on the average amount of income support received per adult across 6 family types: single parent, two parent, non-elderly single and couple, elderly single and couple 6

T1: Income Security Spending: Horizontal Equity? Type of BenefitParent FamiliesNon-ElderlyElderly Total ($M) OneTwoSingleCoupleSingleCouple Old Age Security$31$111$0 $15,452$20,885$36,479 GIS, Spouse Allowance $20$85$267$0$6,641$3,964$10,977 Canada Child Benefit $1,435$4,308$0 $5,743 Child Bft Supplement $1,413$1,889$0 $3,302 Universal Child Benefit $1,065$6,569$0 $7,634 Empt Insurance$724$6,436$4,812$4,409$71$456$16,907 GST Credit$379$487$1,945$311$782$382$4,286 WITB$150$191$875$197$3$10$1,427 TOTAL ($Millions) Av Benefit/Adult % With Benefit $5,217 $7, % $20,078 $3,222 71% $7,907 $1,336 71% $4,919 $3,836 18% $22,950 $9,288 98% $25,698 $7,445 86% $86,770 $4,753 63% 7

T2: Income Transfer Expenditures for Low- Income Adults Benefit Generosity, Poverty Measures Type of Nuclear Family Total ($M) Parent Families Non-ElderlyElderly OneTwoSingleCoupleSingleCouple TOTAL ($M) Benefit/Adult % Receiving Benefit $9,171 $8, % $1,853 $6,148 96% $1,159 $818 95% $194 $1,172 55% $2,862 $13, % $511 $9,799 59% $7,497 $3,305 90% Poverty Rate Depth of Poverty 24.4% 23.0% 7.9% 24.4% 31.3% 49.0% 4.5% 41.9% 10.7% 15.5% 1.5% 23.0% 9.7% 35.9% 8

T3: Impact on Disposable Income of Current Non-refundable Tax Credits Non-Refundable Credit Family Low-Income Status (After tax LICO) All Adults Total ($M) Under LICO 1 -2 X LICO 2 -3 X LICO 3 -4 X LICO 4+ X LICO Basic+4.8%+5.0%+4.3%+3.6%+2.1%+3.5%$36,979 Age + Pension+0.16%+0.86%+0.70%+0.43%+0.17%+0.46%$4,900 Married + Eq.+0.16%+0.35%+0.30%+0.15%+0.07%+0.19%$1,999 Employment Inc+0.15%+0.26%+0.29%+0.27%+0.17%+0.23%$2,450 CPP Contributions+0.74%+0.38%+0.31%+0.27%+0.16%+0.27%$2,833 EI Contributions+0.04%+0.12%+0.17% +0.11%+0.14%$1,442 Fitness & Transit+0.04%+0.05%+0.06%+0.04%+0.02%+0.04%$402 Family + Caregiver+0.02%+0.03% +0.02%+0.01%+0.02%$209 Disability+0.02%+0.06%+0.08%+0.06%+0.03%+0.06%$587 Total Education+0.09%+0.17%+0.15%+0.12%+0.08%+0.12%$1,261 Medical Expenses+0.03%+0.11%+0.16%+0.12%+0.08%+0.11%$1,166 Charitable+0.02%+0.07%+0.18%+0.22%+0.38%+0.24%$2,572 Family Tax Cut+0.03%+0.16%+0.32%+0.20%+0.11%+0.18%$1,960 Total+8.74%+8.86%+7.20%+5.73%+3.49%+5.85%$62,063 9

T4: Design of a National UGBI Family Size Basic Income Guarantee Benefit Reduction Rate Exit Level of Family Income Amount% of 2015 A.T. LICO (1) 1$6, %$46,667229% 2$9, %$63,168255% 3$11, %$77,367250% 4$13, %$89,333232% 5$14, %$99,880227% 6$16, %$109,413225% 7+$17, %$118,180221% Top-up for Disability & Infirm Dependants: $1,500 Top-up for Caregivers: $750 Note: (1) For cities of 500,000 and over 10

T5: Cost and Financing of the National UGBI Cost & Sources of IncomeAmount ($Billions) Cost of the National UGBI$ Sources of Revenue: A. Elimination of Non-Refundable Tax Credits - Basic$ Age & Pension Income$ Fitness & Transit$ Total Education$ Family Tax Cut Credit$ Total Non-Refundable Tax Credits (1)$ B. Elimination of Refundable tax Credits - Goods & Services Tax Credit$4.286 Total Revenue$ Note: (1) The total of all of the tax credits, taken together, is slightly higher than the sum of the credits taken individually ($45.502) due to the combined effect on taxes paid. 11

T6: Distribution of Winners and Net Impacts by After-tax LICO Status – Canada 2015 A.T. LICO Level of Family Income Per cent of Nuclear Families Average Family After- tax Income Before UGBI Net Impact (UGBI – Tax Increase) Per cent Gaining Income Amount ($)% of After- tax Income Below LICO12.0%$12,652+$4, %98.4% 1 – 2 x LICO31.4%$29,606+$1, %64.2% 2 – 3 x LICO28.0%47,409-$1, %26.1% 3 – 4 x LICO15.8%$63,097-$1, %21.1% 4+ x LICO12.9%$116,541-$2, %16.6% TOTAL100.0%$52,507$00%42.8% 12

T8: Impact of the UGBI on Poverty (A.T. LICO) by Family Type Nuclear Family TypeRate of PovertyDepth of Poverty (1) Pre- UGBI Post- UGBI Impact (%) Pre- UGBI Post- UGBI Impact (%) Single Parent15.4%0.9%-94%30.6%48.5%+58%(2) Two Parent5.0%0.7%-86%25.4%38.7%+52%(2) Non-Elderly Single17.8%12.2%-31%56.4%36.0%-36% Non-Elderly Couple4.3%1.9%-56%48.9%36.2%-26% Elderly Single8.7%1.8%-79%10.7%7.5%-30% Elderly Couple2.2%0.8%-64%39.4%50.7%+29%(2) TOTAL10.8%5.8%-46%46.2%35.4%-23% Note: (1) The depth of poverty is measured as the per cent family income is below the low income cutoff. It is the per cent gap between the average family income and the poverty line. (2) There is a rise in the depth of poverty because only the poorest of the poor remain low income. 13

T9: Alternative Financing: 23.7% increase in Marginal tax rates Federal Income Tax BracketCurrentNew Bottom15.0%18.55% 2 nd 22.0%27.21% 3 rd 26.0%32.16% 4 th 29.0%35.87% 14

T10: Distribution of Winners and Net Impacts – Option A vs. Option B A.T. LICO Level of Family Income Option AOption B % of After-tax Income % Winners% of After-tax Income % Winners Below LICO+36.2%98.4% +40.9%98.8% 1 – 2 x LICO+4.8%64.2%+9.0%81.6% 2 – 3 x LICO-2.3%26.1% -0.5%36.4% 3 – 4 x LICO-2.8%21.1% -2.8%25.0% 4+ x LICO-1.8%16.6%-5.1%19.0% TOTAL0%42.8%0.0%51.8% 15

T 11: Impacts on Poverty ImpactsOption AOption B Rate of Poverty-46%-52% Depth of Poverty-23%-20% 16