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The case for a guaranteed basic income must go beyond poverty reduction: Senator Woo
May 13, 2021
image Yuen Pau Woo
Yuen Pau Woo
ISG - (British Columbia)

From Greens to Conservatives, it seems everyone has a version of guaranteed basic income (BI) that they can support. There is confusion, however, over the objectives of BI and very different views on what is feasible.

The debate on BI has advanced with the recent publication of a study commissioned by the British Columbia government and by two reports from the Parliamentary Budget Office (PBO).

The B.C. report rejects BI on the grounds that it would be cheaper to achieve poverty reduction in the province through targeted measures. The PBO report suggests that the national poverty rate can be halved at no net cost, assuming the elimination of some tax credits and social assistance programs. Who is right?

Both are, but advocates and opponents of BI would be wrong to use either report as validation. That the PBO simulation was able to "force” revenue neutrality is simply a matter of accounting. While it is impressive that this scenario reduced poverty significantly, the authors of the B.C. report would surely counter that they could get as much poverty reduction using targeted measures, at lower cost. To the extent that the policy objective is poverty reduction, the B.C. report is solid.

It should be obvious that if we throw enough money at the problem of poverty, we will make a big dent in poverty rates. The question is always about trade-offs such as fiscal capacity, disincentive effects, administration costs and the distribution of benefits.

That is why the case for BI cannot rest solely on poverty reduction. Basic income is not another anti-poverty measure. It is not employment insurance, either. It is not even social assistance in the traditional sense of helping those with specific needs, such as disability or homelessness. It is, rather, a different kind of social safety net for a different set of societal circumstances, including the changing nature of work.

At the heart of BI is the concept of individual freedom and personal dignity, or more particularly, the means by which individuals can exercise their freedoms. Freedom from poverty is one such goal, but so is freedom to learn, freedom to do unpaid work and freedom to be creative. There is a connection here to Section 7 of the Canadian Charter of Rights and Freedoms, on the right to life, liberty and security of the person.

The B.C. report focuses on freedom from poverty and therefore advocates targeted interventions but worries that providing citizens with other freedoms through BI will create an unsustainable fiscal burden. On this, the PBO report is a useful corrective. One can quibble with the choice of tax credits eliminated to achieve revenue neutrality, but the point is that the fiscal cost of a BI is manageable — with decent poverty reduction to boot.

What about philosophical objections to BI? The B.C. report suggests that a BI is "unjust” because it imposes undue burdens on certain taxpayers who will resent the fact that their fellow citizens are rewarded with cash even if they are not in poverty.

Here again, the PBO simulation is instructive: The burden of a BI falls mostly on the third and fourth quintiles of the population, with each experiencing a modest net loss of 2% of income that I believe can be mitigated by economic growth.

The most efficient way of delivering BI is the tax system. Not everyone files taxes, though. But a BI program which on the one hand incentivizes individuals to register with the CRA and on the other hand spurs the CRA to enhance automatic filing is a reform that is long overdue.

Furthermore, the elimination of some non-refundable tax credits, as suggested by the PBO, would simplify the tax system and make it less regressive. These improvements to our tax code may turn out to be even more important for productivity growth than BI itself.

Both the B.C. report and the PBO calculated work disincentive effects from a BI, but neither weighed in on the potential economic benefits of creative activity, innovation, lower health and criminal justice costs and other pluses of BI that advocates point to. These are admittedly speculative, but any such benefits will only increase the upper bound in a cost-benefit analysis of BI.

Since my framing of BI is more about liberty than it is about social supports, there is nothing to preclude targeted assistance for, say, disabled individuals. In fact, the PBO scenario assumes a universal disability payment of $6,000.

While this amount is less than the federal disability tax credit (DTC) that it replaces, the way it is applied means that disabled citizens with low income are better off than they would be under the DTC. It is, in effect, a progressive reform.

In thinking about a post-COVID economy, it is commonplace to draw analogies to major postwar reforms in employment and health insurance and social assistance.

BI could be the major reform of our time, but only if it is grounded in expanding the liberties of citizens in society.


Senator Yuen Pau Woo represents British Columbia in the Senate.

A version of this article appeared in the April 28, 2021 edition of the Ottawa Citizen and in the May 1, 2021 edition of the Vancouver Sun.