GBI proposal needs some work
In Halifax this weekend, the federal Liberal convention is voting on a resolution to introduce a guaranteed basic income in Canada, a concept that Ontario began testing at the provincial level last year.
A GBI resolution is a long way from a real program. But it’s worth examining early what we need to know about it.
Ontario’s pilot replaces social assistance and disability support payments with a low-income benefit delivered through the income tax system. Individuals aged 18 to 64 who have no income receive an annual benefit (dubbed a negative income tax) of $16,989. The amount is $24,027 for a couple with no income and $22,989 for persons with a disability. These amounts are reduced by 50 cents for every dollar of income recipients earn, which includes payments from Employment Insurance and Canada Pension.
For the individual, the Ontario GBI falls to zero when earnings are twice the basic amount, or $33,796. The aim is to provide a minimum income safety net equal to three-quarters of the government’s “low-income measure” (which is 50 per cent below the median household income) while creating an incentive to earn an additional modest income without losing the entire benefit.
What would be the cost and the impact of a federal GBI? Fortunately, some rough answers were provided this week in a report by Parliamentary Budget Officer Jean-denis Fréchette, responding to a cost-estimate request from Conservative MP Pierre Poilievre.
The PBO estimates a national basic income that targeted the same group and provided the same benefits and clawbacks as Ontario’s pilot would cost a gross amount of $76 billion this year, rising to $79.5 billion in 2022-23.
But if Ottawa, like Ontario, used a GBI to replace existing income supports for people in the target group, the report says the feds would save about $32.9 billion. So the net cost of a federal GBI would be $43.1 billion this year. It would benefit about 7.5 million people.
The $23.9 billion in benefits that Ottawa provides annually to Indigenous people, children under 18 and seniors 65 and older would not be affected, since the GBI isn’t directed toward replacing these basic supports. And child benefits would not be clawed back from parents’ GBI.
Is even $43.1 billion a manageable cost? Clearly, we’d have to see the actual impact on personal and corporate tax rates at different income levels before judging whether this is an acceptable burden.
And there are other information gaps. The PBO says it didn’t estimate the impact of people working fewer hours (often for good reasons like education and family care), which would raise GBI payments and reduce federal tax receipts. The report also notes existing disability benefits are very narrowly targeted. Helping all those who have severe disabilities, i.e., being fair, would add another $3.7 billion to the GBI cost.
Inherently, though, a single basic payment should cost less than running a host of federal and provincial programs. If a federal GBI provides a basic living, the provinces won’t want to pay social assistance, too. And Ottawa wouldn’t let them eliminate their welfare costs at its expense. The net cost of a national GBI could be reduced by replacing both federal and provincial supports and sharing the savings among their taxpayers, who are, after all, the same people. So GBI needs more work, from both levels of government.