Tuesday, September 6, 2016

A possible joint Basic Income proposal

A quick idea/proposal from me on a possible way Basic Income, or more accurately, a Guaranteed Minimum Income might work in Canada. Due to the fact that we split financial responsibility between the Federal and Provincial governments, there are challenges towards getting any such system up and running.

First some quick background on social assistance funding. Ontario Works (welfare) will give an individual $681 per month, and a couple $1077 per month. A couple with one child under 18 gets $1130, while an individual with two children under 18 gets $1004.

One problem with this is that in places like Toronto it can be difficult to find a place to rent for as little as $681 a month, not to mention buying food after paying for rent. It's also likely that a childless couple could easily share a single bedroom apartment, even if their food costs are double that of an individual.

As such I propose dividing up payments into three groups.
1 - Individuals (over age 18)
2 - Households
3 - Dependents (a sub-set of individuals, includes children)

I propose the "base" amount in all these calculations be $340 a month.

The Federal Government will fund the Household fee, and pay 3 times the base amount, monthly, to all heads of households all across Canada. This is $1020 a month.

Each Province meanwhile will fund both the dependent fee, and the individual fee, the base rate, $340 a month, to all individuals and dependents in the province.

Since each household contains, on average, 2.2 persons, this means the Federal government will be kicking in about 3/5ths of the funds for the program. Additionally, the more 'well off' provinces have larger households, while the 'poorer' provinces, have smaller households, meaning they will pay slightly less for this program.

An Individual living on their own, as head of their own household, will now get $1360 a month. A couple living on their own will get $1700, while a couple with a child gets $2040, the same amount an individual with two children would get.

The reason this would work financially is the same reason that a basic income would work. Ontario Works is supplemented by various other funds. Tax breaks apply to rent paid, a GST credit may be available. In addition to Ontario Works, as well as extra funds to pay for heating in the winter. People in Ontario with children can also receive $113 per child as a "baby bonus".  Federally you could also get $533 for having a child as well. All of these programs require people to administrate them, each with their own rules and regulations, and each with their own 'bars' of entry. This new program would eliminate all of them, and replace them with a single united administration of a single fund.

To make this work, the fund would have a 2/3rds exclusive clawback. This means for every dollar you make though other means (IE working) that two thirds of this benefit is clawed back. The exclusive part means this is calculated after any and all other clawbacks, including taxes. As such you can never be 'worse off' for working. This contrasts with a more standard 50% non-exclusive clawback that can often combine with taxes and other clawbacks (such as legally mandated debt repayment) so that working means you have less money.

This would replace all social assistance funding, including pensions (the poorest pensioners would, in general, see an increase under this new system, of about $100-300 a month) The amounts agreed to could always be higher than what I propose, but I strongly recommend against being lower, as the level I propose is already far below the poverty line. These rates must be indexed to inflation/CPI. Once agreed, the Federal and all Provincial governments would sign their agreement, and neither the Federal nor the Provincial governments could ever go below this level. However. Either side could decide to go above this level and provide extra funding at their discretion. The Federal government would also be responsible for fully funding this in the Territories. There would also be nothing stopping either side from retaining certain social programs and thus providing extra funding for - for example - children. Should they decide to do this, however, they would be responsible for funding the program themselves.

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