1. Basic Income Some Options for Canada

2. Introduction
Goal: A basic income that is progressively structured and progressively funded
Report on options that Canadians can understand and have a say in

3. BICN evolution: raising awareness; The Basic Income We Want; feasible, financed policy options
The Policy Options Project team: Kourtney Koebel, Jim Mulvale, Chandra Pasma, Toni Pickard, Rob Rainer, Sheila Regehr

4. Our Approach Security and dignity, more than poverty
Progressive benefits and financing
Costing and financing as two sides of the coin (gross vs. net cost)
Many ways to pay for a basic income - and downstream savings possible

5. Our Approach
Canada has basic income programs for seniors (Old Age Security and Guaranteed Income Supplement) and for families with pre-adult children (Canada Child Benefit)
Canada tax system is complex, with regressive features
Behavioural effects: we are not modeling these (little evidence or confidence that such models are meaningfully predictive)

6. Design Matters
Universal or Income-Tested? (demogrant, or income-tested and, if the latter, at what benefit reduction rate)
Individual or Family? (empowerment, horizontal equity)
Maximum Benefit?
Which government(s) responsible?

7. Design Matters
What gets replaced or rolled into a basic income? (social assistance, other income security programs, tax expenditures)
How will the basic income be paid for? (reallocations; current and new taxes, e.g., financial transaction taxes; sovereign wealth funds)

8. Guiding Principles Behind the Modeling
Basic income to be universally available to all Canadians, permanent residents, and protected persons, regardless of employment status, family composition, availability for work, and wealth or savings

9. Guiding Principles Behind the Modeling
Maximum amount of the basic income to be set at a level that ensures everyone is above the poverty line, after all taxes and transfers are accounted for

10. Guiding Principles Behind the Modeling
Basic income to not be tied to paid employment, but when low-income basic income recipients undertake paid work, they should always come out ahead

11. Guiding Principles Behind the Modeling
Any reductions in the amount of basic income should occur gradually as total income rises

12. Guiding Principles Behind the Modeling
Basic income to be administered in a way that is responsive to fluctuating levels of total income

13. Guiding Principles Behind the Modeling
Any reductions in total income to begin with the highest income earners; the highest income deciles to see a proportionally greater reduction than income deciles lower down

14. Guiding Principles Behind the Modeling
Basic income and any changes in the tax structure to respect gender equality

15. Guiding Principles Behind the Modeling
Basic income may replace a number of existing income security programs, but not at the expense of crucial social support programs, nor to replace contributory social insurance programs (e.g., Canada Pension Plan, Employment Insurance)

16. Guiding Principles Behind the Modeling
Basic income to be national in scope, and may involve both federal and provincial programs

17. Options We Are Modeling
Option One: An income-tested basic income, structured re: family composition and paid to working age adults only, keeping in place the Canada Child Benefit for children under 18 and Old Age Security and the Guaranteed Income Supplement for seniors

18. Options We Are Modeling
Option Two: An income-tested basic income, structured re: family composition and paid to all adults 18+, keeping in place the CCB in place for children but replacing OAS and the GIS for seniors

19. Options We Are Modeling
Option Three: A universal demogrant, structured re: family composition and paid to all adults over the age of 18, and keeping in place the CCB for children

20. Options We Are Modeling
Option Four: A universal demogrant, with identical benefits paid to all adults over the age of 18, and keeping in place the CCB for children

21. Key Parameters of Each Option
For income-tested and demogrant models, maximum basic income for a lone adult: ~$22,000
For income-tested models, maximum basic income for a couple: ~$31,000
For income-tested models, a Benefit Reduction Rate of ~44%

22. Example of the Benefit Reduction Rate
◄Turning Point
◄ Benefit Reduction Rate 1
Maximum basic income available
◄ Benefit Reduction Rate 2
Exit Point

23. Key Parameters of Each Option
For family composition, using concept of the “nuclear family” = an adult or adult couple and their children <18, living together
For income-tested models, using family net income for the calculation of the Benefit Reduction Rate

24. Assumptions
Administration – short term responsiveness to changes in income
Federal-provincial relations – assume cooperation
No changes to other programs – social housing, drug/dental benefits, etc.
Support for persons living with disabilities
Externalities – paid work, physical and mental health, consumption, community involvement, political participation, etc.

25. Financing a Basic Income (Federal and Provincial)

26. Financing a Basic Income
Challenges:
Many decisions
Complicated and intertwined tax system
Existing tax and transfer system is very regressive
Difficult to create progressivity in terms of losses
Social assistance
Upper-middle income elderly do relatively well in current system

27. Example: Non-Refundable Tax Credit
Middle Income Tax Return Basic Federal Tax: $5,000 NRTC: -$1,000 Federal Tax Payable: $4, % of the value of the NRTC captured
Lower Income Tax Return Basic Federal Tax: $ 500 NRTC: -$1,000 Federal Tax Payable: $ 0 50% of the value of the NRTC captured

28. Example: Refundable Tax Credit
Middle Income Tax Return Basic Federal Tax: $5,000 RTC: -$1,000 Federal Tax Payable: $4, % of the value of the RTC captured
Lower Income Tax Return Basic Federal Tax: $ 500 RTC: -$1,000 Federal Tax Payable: -$ % of the value of the RTC captured

29. Non-Refundable Tax Credits
Percent of individuals claiming and benefiting from NRTCs by income quintile (Koebel, 2016)

30. Federal Sources of Revenue
1. Federal Programs:
OAS/GIS ≈ $50B
Basic Personal Amount (NRTC) ≈ $40B
GST/HST Credit ≈ $4B
2. Personal Income Tax Changes:
Tax fairness changes
Small tax rate changes
3. Corporate Income Tax Changes

31. Federal Sources of Revenue
1. Federal Programs:
OAS/GIS ≈ $50B
Basic Personal Amount (NRTC) ≈ $40B
GST/HST Credit ≈ $4B
2. Personal Income Tax Changes:
Tax fairness changes ≈ $35B
Small tax rate changes ≈ $8B
3. Corporate Income Tax Changes

32. Federal Sources of Revenue
1. Federal Programs:
OAS/GIS ≈ $50B
Basic Personal Amount (NRTC) ≈ $40B
GST/HST Credit ≈ $4B
2. Personal Income Tax Changes:
Tax fairness changes ≈ $35B
Small tax rate changes ≈ $8B
3. Corporate Income Tax Changes ≈ $17B

33. Provincial Sources of Revenue
Provincial GIS top-up ≈ $0.7B
Social assistance payments ≈ $15B
Non-refundable tax credits ≈ $30B
Pension income splitting ≈ $0.6B
100% inclusion of capital gains ≈ $3B

34. Modeling a Basic Income

35. Designing our Basic Income
Modeling both income-tested and demogrant versions
Guarantee based on family composition
Exclusion/inclusion of seniors
Setting benefit amount and the benefit reduction rate – tradeoffs
Jurisdictional considerations

36. Option 1 Income-tested based on family composition
Working-age adults (i.e., excluding adults 65+)
Cost ≈ $145B-$155B (excluding OAS-GIS ≈ $40B)

37. Option 2 Income-tested based on family composition
All adults 18+ (including adults 65+)
Cost ≈ $195B-$205B

38. Option 3 Universal demogrant based on family composition
All adults 18+
Cost ≈ $800B-$810B

39. Option 4 Universal demogrant - not based on family composition
All adults 18+
Cost ≈ $645B-$655B

40. Impacts We Are Examining
Family disposable income, by family net income decile
Average net impact on taxes paid for nuclear families, by income decile
Average impact on family disposable income, by family types in the bottom decile
Rate of poverty (LICO) and Gini coefficient, by family type
Gender and regional analyses

41. Key Results of Modeling
Significant increase in disposable income for poorest households
Largest increase for working-age adults without children
Significant reductions in poverty and inequality
Progressivity achieved

42. Ongoing Considerations…
Optimal size of a Basic Income Guarantee / optimal Benefit Reduction Rate?
Treatment of seniors
Gross cost of a demogrant (Universal Basic Income)
Improvement over the existing system (Marginal Effective Tax Rates)

43. Sheila Regehr: sj.regehr@gmail.com Rob Rainer: rob@robrainer.com
Sheila Regehr:
Rob Rainer:
Kourtney Koebel: