Basic income will need tax increases and spending cuts: Study

Halifax –

A new study published Thursday said that a guaranteed basic income in Canada would help alleviate poverty, but could also jeopardize the financial sustainability and labor supply for some provinces.

Providing people with a monthly check will ensure that everyone has enough money to meet their basic needs, including food, housing and clothing, the report from the Atlantic Provinces Economic Council, a Halifax-based economic think tank, said.

The study found that income support would reduce inequality, create a sense of financial security and encourage saving.

However, the report said that a basic income program — whether it’s needs-based or comprehensive, with the amount being paid to high-income earners who are compensated through taxes — will be more complex than it appears.

She added that funding for the program would likely require raising taxes or cutting government spending.

“One of the biggest risks is how this program will be financed in the long term,” said Lana Asaf, chief economist at the Asia-Pacific Economic Cooperation. “It is very expensive.”

A report by the Parliamentary Budget Officer estimated that a guaranteed national basic income would cost about $88 billion in 2022-2023.

Asaf said that if social programs are cut to help pay basic income, there is a risk that certain groups in society will fare worse.

And the risk in some regions, such as Atlantic Canada, may also be worse, she added.

Meanwhile, guaranteed income can also create a disincentive to work, which may exacerbate the current labor shortage.

“There is a concern that it might deter people from working,” Asaf said. “This can be challenging especially in lower-wage industries, where we’re seeing a lot of labor shortages.”

The idea of ​​a guaranteed basic income program has gained renewed interest during the pandemic.

The introduction of the Canadian Economic Recovery Advantage, or CERB, and other pandemic benefits has stimulated discussions about the adequacy of our country’s social safety net.

In December 2021, Senator Kim Patt and Representative Leah Ghazan introduced bills aimed at creating a national framework for a “secured livable basic income,” according to the APEC report.

“Basic income is a concept that’s been around for a while…but it’s becoming a more mainstream topic,” Asaf said. “There are potential advantages and disadvantages to the program but some of them are theoretical in nature.”

No basic income programs are currently being tested in Canada.

In 2018, the British Columbia government commissioned a panel of experts to study basic income, including the program’s feasibility and potential for poverty reduction.

He found that switching to a basic income would be a complex task and not necessarily the most cost-effective way to reach poverty goals.

The committee said income support targeting specific groups may be a better alternative.

Ontario launched a three-year basic income pilot in 2017, but it was canceled before completion after a change of government.

This report was first published by The Canadian Press on June 16, 2022.

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