Ken Boessenkool is a partner in Kool Topp & Guy Public Affairs.
The government of Canada has responded to the economic crisis facing Canadian families by proposing to spend $27-billion dollars, by making existing programs easier to access (employment insurance); designing a new program (a new Emergency Care Benefit); expanding existing programs for students, seniors and Indigenous peoples among others; and allowing Canadians to defer filing and paying taxes.
The government has decided on a rifle approach – targeted, mostly toward application-based programs and expansions of existing programs.
The first danger of this approach is that it will take time to design and to administer the new and expanded programs. According to the government’s own documents, the new Emergency Care Benefit applications will be available in April. Expanded HST/GST and Child benefits will flow in May.
The second danger is that application-based programs risk increasing human interaction through the various application processes, never mind all the work and time needed by bureaucrats working together to design or redesign multiple programs.
This means well-intentioned programs may not arrive in time and may be held up if isolation requirements get more stringent.
While it pains me as a conservative to suggest this, the government should consider adding another $27-billion dollar expenditure for a Crisis Basic Income as a supplement to what has been announced.
The idea has its roots in the idea of a Universal Basic Income (UBI), which numerous thinkers have proposed as a way of simplifying and streamlining programs for the poor and vulnerable by providing a basic common payment, or universal income, to all citizens, usually through the tax code.
UBI is a bad idea in the long term. It lumps people with different needs and different situations into one bucket, which means we would still need most of the myriad programs we have today for those with differing needs. Then there is the long-term incentive created by a UBI. What is to stop perfectly able-bodied persons from stopping work, collecting the benefit and enjoying some leisure time? UBI ski bums here we come.
Yet what makes a UBI a bad idea in the long term is precisely what makes it a great idea in the current crisis. One of the biggest economic and health challenges we face is the sudden loss of working income, and a Crisis Basic Income can be delivered through the tax system as the vast majority of working Canadians file taxes – and the critical failure we are facing today is the immediate loss of working income.
And what is a bug for the UBI becomes a feature for the Crisis Basic Income. In a COVID-19 world, we want people to bias their decisions against going to work, to stay home if they feel a bit ill and not worry about the consequences. And because the income will only last as long as the crisis lasts, there will be little or no lasting consequences.
This isn’t to say that this won’t cost a lot collectively. 28.5-million Canadians filed income tax forms last year. Sending a cheque to each one of those for $2,000 would cost $57-billion.
For now.
It would be a rather simple matter for the government to add a line to next year’s tax form where, if you paid no tax, you get to to keep all of the money. And if you paid the lowest rate, we progressively tax back the benefit. So at $12,000 of personal income you keep it all, and at $60,000 you pay it all back. We could do this on an individual or a family basis.
My rough math for the individual approach says that the 29 per cent of filers who paid no tax in the 2018 tax year would keep all the money. And let’s assume that the 27 per cent of the population who make above $60,000 would pay it all back. And because that’s unrealistic, let’s assume the entire portion between $12,000 and $60,000 also keep all the money because their taxable income dropped due to the crisis.
This would put the total cost of a $2,000 per filer payment at roughly $27-billion dollars for a month. So a two-income family would get $4,000. A family approach would cost less, as many lower-income second earners would lose their benefits.
Designing a CBI now can bridge the gap to when the programs the government announced yesterday come online and provides a stopgap in case implementation of those programs gets hung up.
Canada can afford this – arguably it can’t afford not to – because Canadian governments of all stripes have been, for the past 30 years, and with some notable exceptions, relatively fiscally prudent.
Sometimes an idea that makes no sense in normal times makes perfect sense in times of crisis. This is one of those times, and a Crisis Basic Income is one of those ideas.
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