The unsteady foundation of basic income proposals

Many people, especially seniors, could see a drop in their incomes under a guaranteed annual income

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annual incomeVANCOUVER, B.C., May 1, 2017 /Troy Media/ – Do the politicians seeking British Columbians’ votes on May 9 think we’re all under five-years-old and believe in Santa Claus?

The public conversation about providing basic income in the province would suggest so.

As the B.C. election approaches, we’re being regaled with all the enticing indulgences a new government might deliver. Ten-dollar-a-day child care for every family. Why not? No more health-care premiums. Sounds good. Rental subsidies. Sure.

But how much will these goodies cost and who’s going to pay for them? Satisfactory answers haven’t been forthcoming.

David Chilton, author of the book The Wealthy Barber and sequels, tells us we can have financial success if we look at all we might like and ask if we can afford it. Sometimes the answer is no.

Most of the time, we don’t ask governments and politicians the same affordability question and, when we do, it’s difficult to get a straight answer.

Have the total costs even been calculated? What about unintended consequences such as when increasing benefits leads more people to make use of a government service? How much will raising taxes, even on the rich or big corporations, reduce jobs and overall economic activity?

Nowhere are these questions and their answers more important than when we look at what is being touted as the means to deal with poverty, eliminate low incomes, preserve the dignity of all citizens and eliminate a pile of bureaucracy. In its various incarnations, this magic solution has been called a guaranteed annual income, a universal income or, more often in the B.C. election campaign, a basic income.

All the details about a basic income have yet to be determined. But the bottom line would be that nobody’s income goes below a fixed level – $15,000 is often mentioned. This amount could be given to everyone and then taxed back for those who don’t need it, just like Old Age Security for seniors. Or top-ups could be given to those with income below that level.

Neither approach solves the problems that basic income is intended to address.

An ideal basic income system should meet all or most of the following criteria:

  • The minimum income should replace, not add to the current mishmash of support programs from various levels of government. The basic payment must be high enough to survive on without further supplementation.
  • We shouldn’t tax people at the lowest income levels at a higher rate than we tax millionaires. As people add to their income from other sources, they should be able to keep at least half of that extra money and not have it all deducted from their basic income grant. This is fair, and helps maintain incentives to become employed and independent.
  • We shouldn’t have to subsidize middle-income people who don’t need it. A minimum income of $15,000 and a still-high tax-back rate of 50 per cent means we would be subsidizing individuals with incomes of $30,000. A higher floor and lower tax-back rate would push the subsidies out to those at even higher income levels. What impact would that have on workers who earn those amounts?
  • Implementing basic income should not cost us more than all the welfare and related income support systems such as employment insurance that it could replace. And, even more important for citizens and those politicians seeking our support, it should not make anyone worse off.

Kevin Milligan, a professor of economics at the University of British Columbia’s Vancouver School of Economics, has crunched the numbers. The costs can easily go higher than what all governments now spend to maintain incomes. And many people, especially seniors, could see their incomes fall.

There’s broad interest in a successful basic income program.

But I suspect it can’t be created in a practical fashion.

Between now and when I head to the polling booth, I’ll be looking closely at the feasibility and affordability of basic incomes and all the other wonderful things we’re being offered.

But I know there’s no Santa Claus.

Troy Media columnist Roslyn Kunin is a consulting economist and speaker. Roslyn is included in Troy Media’s Unlimited Access subscription plan.


The views, opinions and positions expressed by all Troy Media columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of Troy Media.
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