A Federal Cash-for-Cuts Basic Income Plan Designed To Impoverish Single Mothers

It’s time for another Basic Income piece!

TL;DR: MPs and Senators asked the Parliamentary Budget Office to analyze a cash-for-cuts Basic Income program, based on the Ontario BI pilot. While the cash part helps many low-income Canadians, the cuts are incredibly harmful to individuals or children with disabilities. It’s also particularly harmful to single parents, with low-to-middle income single parents losing, on net, over $5,000, three times more than the amount billionaires would have to forego under the plan.

As I’ve stated in previous Basic Income pieces, it’s important to note that the Basic Income (BI) movement is dedicated to improving the lives of Canadians and would be horrified by the idea that the cuts in their plans would hurt the most marginal and vulnerable in our society. The problem with these plans is not the intent of the advocates, but simply that the advocates haven’t thought through the harms that their proposed cuts would cause.

This week the Parliamentary Budget Office released another in their series of reports on Basic Income: Distributional and Fiscal Analysis of a National Guaranteed Basic Income. Why did they conduct this research? Because some MPs and Senators asked them to, and responding to these requests is, in part, what the PBO does:

Several parliamentarians requested that the PBO prepare a distributional analysis of Guaranteed Basic Income using parameters set out in Ontario’s basic income pilot project, examine the impact across income quintiles, family types and gender, and identify the net federal revenue increase required to offset the net cost of the new program.

There’s a few items of note here:

  1. Parliamentarians made this request despite the landmark B.C. Basic Income Panel having spent years studying the very questions they asked of the PBO. Millions of dollars were spent, dozens of research papers commissioned and released, and the panel finding “that moving to a system constructed around a basic income for all as its main pillar is not the most just policy option. The needs of people in this society are too diverse to be effectively answered simply with a cheque from the government.” I’m not sure what these Parliamentarians were expecting to learn.
  2. The request was to model this after the Ontario Basic Income pilot. As I showed in a previous piece, the cash-for-cuts design of that pilot was incredibly harmful to many with disabilities.
  3. The request specifically called for a cash-for-cuts model (identify the net federal revenue increase). This isn’t surprising, with Liberal MP Julie Dzerowicz’s Bill C-273, An Act to establish a national strategy for a guaranteed basic income, seeking to investigate the potential of a guaranteed basic income program to reduce the complexity of or replace existing social programs”. (emphasis mine)

The PBO took this somewhat vague request and designed a policy proposal to meet these conditions (which isn’t in their mandate) and for some reason decided to include a bunch of provincial policies in the mix (which really isn’t in their mandate).

Here’s how the program works: Individuals would receive a maximum of $16,989, and a couple would receive a maximum of $24,027 per year. Individuals with a disability would see these figures raised by an additional $6,000. For every dollar that individual/couple earned, the amount they receive would be reduced by 50 cents.

How would this be financed? Cuts. A whole lotta cuts. Here’s the list:

Having the basic income would, for many individuals earning little-to-no market income, more than outweigh the costs of these cuts, including the elimination of social assistance. This would help millions of people, though it wouldn’t be particularly targeted — a 19 year-old son of a property developer, going to college and living off The Bank of Mom and Dad, would receive the basic income as their taxable market income is likely to be low. It’s one of issues that the B.C. panel highlighted, that over half of the dollars end up flowing to young people living with their parents.

And, of course, this all assumes that eligible people would actually receive the money they’re entitled to. As Dale Smith points out, in order to receive the money you’d need to file a tax return and “some 14 percent of people are not currently in the tax system (10 percent of whom are known to the system but do not file, and a further four percent who are simply unknown to the system)”. The percentage of people experiencing homelessness who file a tax return is roughly three percent. Canada simply lacks a way to get existing cash-based supports to the most vulnerable and marginalized, and make them more generous does not address this.

Anyhow, back to the cuts. These are not insubstantial: The federal basic personal amount alone is worth over $2,000 to an individual earning $14,000 or more. Then there’s the provincial counterpart, the GST tax credit, etc.

For a lot of low-to-middle income families, these tax increases would be more than offset the value of a basic income. Take a couple in Ontario, both earning minimum wage ($14 hour) and each working 30 hours a week. They would be made thousands of dollars worse off each year by this plan, as the loss of the BPA, GST credit, is worth more, in dollar terms, than a UBI clawed back by 50%.

Is that who should be paying for enhanced cash supports to people in poverty? Minimum wage workers?

Then there’s the loss of all the disability, medical expense credits, etc., which, to many people with disabilities, are worth far in excess of a UBI disabilities top-up that is clawed back by income. I’ll discuss that one in a follow-up piece.

But the biggest losers in all of this are low-to-middle income single parents. Not billionaires or large corporations or that property developer I mentioned earlier. Nope, single Moms. That’s what the PBO concluded in their distributional analysis:

I don’t know how the PBO is defining these quintiles (are they consistent across family types), so I don’t know what the exact income range is for the 2nd quintile of “With children, 1 adult”, other than knowing it’s the second-lowest of the five.

Those low-to-middle income single parents lose, on net, $5,315. Contrast this to the groups of 2+ adults, where the richest quintile sees their disposable income decline by only $503-$2,084, depending on their age and whether or not they have kids.

Why do low-to-middle income single Moms fare so poorly in this system? It’s the loss of the Basic Personal Amount (BPA). Specifically, the equivalent-to-spouse credit built into the BPA:

Another credit is the eligible dependant credit, sometimes called the equivalent-to-spouse credit because the amount is the same as the spousal credit. You can claim this credit if you are single, and support a relative who lives with you who is either an individual under 18, your parent or grandparent, or a person who is dependent upon you because of a mental or physical infirmity. As noted, the amount of the federal credit is exactly the same as the spousal credit, and for the net income threshold you use the net income of the dependant.

This is a huge loss for a single person who is either a parent, or supports an elderly relative or a family member with a disability.

And it is women that are more negatively impacted by this proposal than men. The PBO makes this clear:

This result suggests that women benefit more than men from existing supports for low-income individuals. Since the GBI replaces a large portion of these supports, women incur a higher replacement cost than men.

This hardly seems like a progressive thing to do, to create a program that benefits men at the expense of women.

Why would the PBO (or the Parliamentarians who asked them to) design a policy that is so harmful to low-to-middle income single parents and many people with disabilities? Simple: They haven’t thought through the consequences, and refuse to listen to the advocates and academics who continue to point out these problems.

Now you might think: “Well, that’s why advocates want to run a pilot, to identify and eliminate these problems”. Unfortunately, a pilot can’t do this, as we learned in the Ontario pilot, because a pilot is not a randomized control trial — those are two different things! In the Ontario pilot, anyone who would be harmed by taking the Basic Income simply (and correctly) refused to enroll, so it didn’t, and couldn’t “catch” the harmful side effects.

In short, a “cash-for-cuts” Basic Income model will lead to making some of the very people you want to help be made worse off, so it should be abandoned. Unfortunately, I am not particularly optimistic it will be. Basic Income advocates are a coalition of people with a variety of interests, and to some of them the cuts are the point, as explained by Milton Friedman:

This does also raise the question of what my agenda is. This is a question raised by one of the UBI Works advocates:

Leaving aside the difference between a “conflict of interest” and a “vested interest”, I do have a personal interest in ensuring that people with disabilities are not harmed. My son, Mats, has a disability:

I’m going to keep fighting to protect the programs that help him and kids like him. And I do so unapologetically.

Senior Director, Smart Prosperity. Assistant Prof, Ivey Business School. Exhausted but happy Dad of 2 wonderful kids with autism. I used to do other stuff.

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