Financing Basic Income Addressing the

Cost Objection Pereira

Visit to download the full and correct content document:
https://textbookfull.com/product/financing-basic-income-addressing-the-cost-objection
-pereira/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...

The Palgrave International Handbook of Basic Income

Malcolm Torry

https://textbookfull.com/product/the-palgrave-international-
handbook-of-basic-income-malcolm-torry/

Objection: Disgust, Morality, and the Law Debra

Lieberman

https://textbookfull.com/product/objection-disgust-morality-and-
the-law-debra-lieberman/

Basic Income, Disability Pensions and the Australian

Political Economy: Envisioning Egalitarian
Transformation, Funding and Sustainability Jennifer
Mays
https://textbookfull.com/product/basic-income-disability-
pensions-and-the-australian-political-economy-envisioning-
egalitarian-transformation-funding-and-sustainability-jennifer-
mays/

Basic Income A Radical Proposal for a Free Society and

a Sane Economy 1st Edition Philippe Van Parijs

https://textbookfull.com/product/basic-income-a-radical-proposal-
for-a-free-society-and-a-sane-economy-1st-edition-philippe-van-
parijs/
China: Surpassing the “Middle Income Trap” Shaojie Zhou

https://textbookfull.com/product/china-surpassing-the-middle-
income-trap-shaojie-zhou/

Algal Biofuels First Edition Leonel Pereira

https://textbookfull.com/product/algal-biofuels-first-edition-
leonel-pereira/

Addressing the millennial student in undergraduate

chemistry 1st Edition Dockery

https://textbookfull.com/product/addressing-the-millennial-
student-in-undergraduate-chemistry-1st-edition-dockery/

Spain After the Indignados/15M Movement: The 99% Speaks

Out Óscar Pereira-Zazo

https://textbookfull.com/product/spain-after-the-
indignados-15m-movement-the-99-speaks-out-oscar-pereira-zazo/

The Law of Security and Title-Based Financing Hugh

Beale

https://textbookfull.com/product/the-law-of-security-and-title-
based-financing-hugh-beale/
Exploring the Basic Income
Guarantee

Series Editor
Karl Widerquist
Georgetown University, Doha, Qatar

Basic income is one of the most innovative, powerful,

straightforward, and controversial proposals for addressing poverty
and growing inequalities. A Basic Income Guarantee (BIG) is
designed to be an unconditional, government-insured guarantee that
all citizens will have enough income to meet their basic needs. The
concept of basic, or guaranteed, income is a form of social provision
and this series examines the arguments for and against it from an
interdisciplinary perspective with special focus on the economic and
social factors. By systematically connecting abstract philosophical
debates over competing principles of BIG to the empirical analysis of
concrete policy proposals, this series contributes to the fields of
economics, politics, social policy, and philosophy and establishes a
theoretical framework for interdisciplinary research. It will bring
together international and national scholars and activists to provide
a comparative look at the main efforts to date to pass unconditional
BIG legislation across regions of the globe and will identify
commonalities and differences across countries drawing lessons for
advancing social policies in general and BIG policies in particular.
More information about this series at
http://​www.​springer.​com/​series/​14981
Editor
Richard Pereira

Financing Basic Income

Addressing the Cost Objection
Editor
Richard Pereira
University of Birmingham, Birmingham, UK

Exploring the Basic Income Guarantee

ISBN 978-3-319-54267-6 e-ISBN 978-3-319-54268-3
DOI 10.1007/978-3-319-54268-3

The registered company address is: Gewerbestrasse 11, 6330 Cham,

Switzerland

Library of Congress Control Number: 2017943361

© The Editor(s) (if applicable) and the Author(s) 2017

This work is subject to copyright. All rights are solely and exclusively
licensed by the Publisher, whether the whole or part of the material
is concerned, specifically the rights of translation, reprinting, reuse
of illustrations, recitation, broadcasting, reproduction on microfilms
or in any other physical way, and transmission or information storage
and retrieval, electronic adaptation, computer software, or by similar
or dissimilar methodology now known or hereafter developed.

The use of general descriptive names, registered names,

trademarks, service marks, etc. in this publication does not imply,
even in the absence of a specific statement, that such names are
exempt from the relevant protective laws and regulations and
therefore free for general use.

The publisher, the authors and the editors are safe to assume that
the advice and information in this book are believed to be true and
accurate at the date of publication. Neither the publisher nor the
authors or the editors give a warranty, express or implied, with
respect to the material contained herein or for any errors or
omissions that may have been made. The publisher remains neutral
with regard to jurisdictional claims in published maps and
institutional affiliations.

Cover image: Détail de la Tour Eiffel © nemesis2207/Fotolia.co.uk

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature

The registered company is Springer International Publishing AG
Preface
Work on this book began in late 2014, when the series editor for
Palgrave Macmillan’s Exploring the Basic Income Guarantee invited
me to write a book on the question of financing a basic income. The
book would fill a significant gap in the literature he suggested and
would be an important contribution to scholarship on this issue.
So began the journey of finding authors to help tackle this
complex issue. There was substantial enthusiasm for the subject;
however, it was viewed as a daunting task by many or their
academic and professional lives were just too occupied to take on
this subject they deemed very worthy. What is presented within
these pages is the effort and analyses of international authors and
scholars with experience on the subject of public finance and public
program assessment on three different continents. Case studies from
North America, Europe and Australasia are included in these
chapters with applicable insights for various countries within these
regions.
In the two-year period during which this book was being written
and edited, we have seen the pursuit of policies of austerity deepen
worldwide, while simultaneously the issue of tax evasion and
avoidance through offshore tax havens has continually gained more
exposure in the popular press. In the United States, the growing gap
between rich and poor was a central feature of a very long
presidential campaign, particularly before the Democratic Party
finalized its choice of candidate for the White House. In some
countries sovereign wealth funds (SWFs) have continued to amass
wealth for public goods, while other countries have allowed the
value of public and natural resources to be squandered. It is clear
that there is vast wealth in societies throughout the world, but that it
increasingly is consolidated in fewer hands, fewer large multinational
corporations and in offshore tax havens that are an affront to the
proper functioning of society and management of its public finances.
This is the broader international context in which this book has been
written. The specific details concern financing basic income, and
more precisely a decent basic income.
Costly bureaucracies in modern societies do not deliver income
security in the way they were originally intended to, and often
overlap and contradict each other. Can we not find a way to reorient
this wasteful system so that resources are better channelled to
ensure universal income security? For a long time the proposed
solution has been a basic income, or guaranteed annual income.
Richard Pereira
November 26, 2016
Acknowledgements
Cynthia L’Hirondelle and SWAG, Trisha Baptie, Marilyn Waring.
John Kenneth Galbraith, David Suzuki, Tommy Douglas.
Those who worked on and are responsible for the creation of the
Croll Report, NAPO.
They and many others leave a legacy and path towards
transformative change in the fields of health care, ecological
understanding, care work, economics and the foundation of basic
income, or guaranteed income.
Contents
1 Introduction:​Financing Approaches to Basic Income
Richard Pereira

Part 1 Foundations for a Basic Income Guarantee

2 The Cost of Universal Basic Income:​Public Savings and

Programme Redundancy Exceed Cost
Richard Pereira

Part 2 Cost Feasibility of Basic Income in Europe

3 Financing Basic Income in Switzerland, and an Overview

of the 2016 Referendum Debates
Albert Jörimann

Part 3 Building Up BIG

4 Total Economic Rents of Australia as a Source for Basic

Income
Gary Flomenhoft

5 Conclusion
Richard Pereira

Appendix 1

Appendix 2

Index
List of Figures
Fig. 4.1 Economic rent from oil extraction

Fig. 4.2 Total Australian land prices 1989–2014

List of Tables
Table 3.1 Gross cost of the basic income in Switzerland (2012)

Table 3.2 Earned income/month with BI at CHF 2,500/month and

clearing payment scale

Table 3.3 Income classes in Switzerland (2010)

Table 3.4 Clearing payment

Table 3.5 Social insurances, total expenses and part of expenses

creditable to the BI account

Table 3.6 Hypothetical model for additional income tax for incomes
above CHF 30,000 per year

Table 4.1 Total resource rents of Australia

Table 4.2 Economic rent minus existing revenue

© The Author(s) 2017
Richard Pereira (ed.), Financing Basic Income, Exploring the Basic Income
Guarantee, DOI 10.1007/978-3-319-54268-3_1

1. Introduction: Financing Approaches to

Basic Income
Richard Pereira1
(1) University of Birmingham, Birmingham, UK

Abstract
The different ways in which basic income can be financed are set out
in this chapter as a guide to reading the book. A decent basic
income is presented as the goal of this work, as opposed to some
basic income proposals that may be viewed as potentially worse
than status quo income security programmes in various countries.
Protecting vital public programmes such as universal health care or
public education, for example, is essential to implementation of a
decent basic income, as is setting it at a sufficient level to ensure a
dignified existence and a measure of social inclusion. Proposals that
set out to cut public programmes in wholesale fashion and set a low
level of basic income are rejected. Income security programme
redundancies are discussed in this light along with differing models
and methods of financing basic income.

Keywords Basic income – Finance – Financing basic income –

Programme redundancy – Demogrant – Public programmes
Richard Pereira
is Doctoral Researcher at the University of Birmingham, UK, and was
formerly an economist with the House of Commons in Canada.
This book addresses the cost objection to basic income and whether
a decent basic income is affordable. What are the public costs – and
savings – of implementing basic income? It is important to
emphasize that a basic income that is set too low, or below the
official poverty line of a society, is not meeting the goal of a basic
income as presented in the academic literature and in more common
political and popular presentations of the concept. The objective of
this public policy is to provide members of a society with the ability
to meet basic needs and achieve a measure of social inclusion, even
if they cannot find a job in the labour market to provide adequate
income to satisfy these basic needs. This book sets out to meet the
definitional goals of basic income and it addresses the cost objection
by focusing on a decent basic income and its financial feasibility.
Also related to providing an adequate basic income is presenting
a proposal which does not cut all or most other public programmes
in a wholesale fashion, thereby potentially leaving members of a
society in a worse financial state than under the current system.
Universal public health-care programmes currently in place in many
countries, and the provision of free and subsidized public education,
are two examples of programmes which if eliminated in order to
finance a basic income would create catastrophic costs for many
people that could not be covered by the often very modest and low
levels of basic income found in most proposals. The prominent work
of Charles Murray provides one such approach, which is not
supported by this book. Our goal is to provide a much higher level of
basic income than found in proposals such as Murray’s, while also
preserving vital public programmes such as universal health care.
We recognize that many public programmes become redundant with
the implementation of basic income, and these savings can be
directed to financing basic income. What differentiates this book
from others is that public programme redundancies are accounted
for and treated in a far more selective fashion than in other
prominent proposals, and the level of basic income is set much
higher than normally found in the academic literature.
Three countries on three different continents are also analysed in
proposing a progressive basic income in this study. The combination
of ensuring a decent level of basic income and preserving vital public
programmes, such as universal health care and others detailed in
the following chapters, ensures an analysis of the financial feasibility
of basic income which does not undermine or contradict the
objectives of this policy initiative. We want to avoid a regressive
basic income proposal, which could leave individuals worse off than
under the status quo.

Basic Income Models

The two most common approaches to providing a universal basic
income are a negative income tax (NIT) and demogrant. The NIT
tops up the income of individuals who fall below a certain threshold
(this could be the official poverty line, or something higher, for
instance). The demogrant refers to a basic income provided to
everyone regardless of income. This latter version will usually be
paid back in part or in full through existing income tax regimes by
individuals whose incomes are above a threshold. The demogrant is
paid to all adults and can include provision for a basic income
demogrant for children – often set at one-half or one-third of the
adult amount for children in many proposals.
A third approach is to pay a universal dividend to members of a
society, such as is paid annually in Alaska. This is a type of
demogrant, although a variable one which fluctuates significantly
from year to year and is usually based on the natural resources of a
society. The universal dividend is not a basic income as per the
common definition of the term, however if provided at a sufficient
level it can meet (and exceed) the goals of a basic income. In this
book a universal dividend model is explored as a way to buttress and
add to basic income proposals, and possibly provide a superior
universal payment as compared with many basic income proposals
previously on offer. A universal dividend is based on common wealth
in society such as land, natural resources such as oil, forests and
minerals, and social resources. A portion of the profits from these
common, natural and social assets is shared equally among
members of society in a universal fashion.
Combining a basic income with a universal dividend can present
a robust new approach to income security in the twenty-first century.
A basic income can eliminate (or significantly reduce) some of the
most oppressive and inefficient bureaucracies by transferring this
public money directly to those most in need, creating a higher
degree of empowerment and freedom for those unable to access
stable or lucrative employment. It can eliminate a lot of waste of
public resources and provide significant public savings. A universal
dividend can distribute the excess profits (or economic rent) found in
many sectors, particularly where natural resource wealth is
concerned, to augment the basic income.

Financing Approaches
Most commonly, basic income proposals rearrange existing income
transfers and combine them into a single basic income programme.
Welfare payments and their associated bureaucracies are eliminated,
and numerous other related programmes are similarly streamlined
into one more efficient, de-bureaucratized basic income. Publicly
provided pensions, various child benefit programmes the state may
have in place, food allowances or food stamps, special tax
deductions for low-income households (and tax deductions for high-
income households), social housing programmes and payments,
charities to address national poverty issues, all can be viewed as
partially or fully redundant with a basic income in place. Eliminating
much of this complexity and cost can allow for a higher basic income
payment than what individuals currently receive from various income
support programmes.
In addition to these savings which go towards financing basic
income, it is common to discuss a rearranging of the tax system to
help finance basic income, particularly a basic income at a decent
level. Some proposals exclusively focus on increasing the progressive
income tax rate structure already in place, that is, the more income
one has the higher the marginal tax rate one pays (see, e.g.,
Appendix 2 for historical marginal tax rates in the United States). In
his chapter Pereira contends that if we first address tax leakages,
such as tax evasion and avoidance through tax havens and
numerous tax shelters, personal income taxes do not have to be
raised to provide a universal basic income. A personal tax cut could
be implemented along with introduction of basic income Pereira
claims, as savings from programme redundancies are so significant,
combined with addressing tax leakage.
Other proposals may focus on increasing corporate income
taxation rates, which have been reduced in many countries by
substantial amounts in recent decades, as a financing measure.
Large-scale government subsidies and tax exemptions for corporate
enterprises (corporate welfare) are also often targeted as being
better redirected to a universal basic income. Some proposals focus
on value-added taxes (VAT) or consumption taxes to raise most or
all of the additional revenue that may be needed to finance a basic
income. Carbon levies (or a carbon tax) are also promoted to raise
and distribute revenues universally, simultaneously addressing
environmental policy objectives and income insecurity. James
Hansen – former Director of the NASA Goddard Institute for Space
Studies – is among the most prominent proponents of the Carbon
Fee and Dividend model (often referred to as fee and dividend).
Different approaches can be employed or mixed to achieve a desired
level of basic income. It is incorrect to assume that personal income
taxes must be raised to finance a decent level of basic income.
Critics of basic income often assume very large increases in personal
income tax rates are required.
Jörimann models a basic income for Switzerland along the lines
of a universal demogrant, as opposed to a negative income tax
model. While Pereira describes and contrasts both universal
demogrant and NIT models of basic income, with no personal
income tax increases required, Jörimann does factor in personal
income tax rises to achieve the desired level of basic income for
Switzerland. The Swiss case study in Chapter 3 proposes a generous
basic income of 2,500 Swiss francs per month, or CHF 30,000
annually for adults 18 years of age and above. A lesser amount is
provided for children.1
Flomenhoft analyses the Australian case in Chapter 4 by focusing
on economic rents. What would a universal dividend paid to all
members of society, based on economic rent, look like? While Alaska
and Norway currently collect large amounts of economic rent
primarily from oil resources, and distribute these proceeds for the
benefit of society (with only Alaska paying out a universal dividend),
they do not capture many other forms of rent that could be used to
pay out a much larger dividend. Capturing economic rent from a
variety of natural and social resources could result in a universal
dividend approximating a basic income, or it could supplement a
basic income. The universal dividend based on such rents is also
interesting in that it is paid out equally to adults and children – there
is not a differentiating amount based on age.

Footnotes
1 Charles Murray’s plan provides no basic income for children, and for adults it would
start at 21 years of age instead of 18, see: In Our Hands: A Plan to Replace the Welfare
State (2016), and “A Guaranteed Income for Every American” The Wall Street Journal,
June 3, 2016. This presents a significant problem for the those aged 18–21 who currently
undertake large-scale debt loads at this crucial time in their lives when attending
university or college, particularly in the United States, Canada or England, for instance
where tuition fees are very high and have been rising aggressively in recent decades.
Part 1
Foundations for a Basic Income
Guarantee
© The Author(s) 2017
Richard Pereira (ed.), Financing Basic Income, Exploring the Basic Income
Guarantee, DOI 10.1007/978-3-319-54268-3_2

2. The Cost of Universal Basic Income:

Public Savings and Programme
Redundancy Exceed Cost
Richard Pereira1
(1) University of Birmingham, Birmingham, UK

Abstract
This chapter addresses the cost objection to basic income, which
rests upon the claims that (a) it is too expensive to implement and
(b) that personal income taxes will have to be raised to such a high
level as to make it politically infeasible. A Canadian case study is
used to demonstrate that the cost savings of implementing basic
income are often greatly underestimated or neglected, and that
personal income taxes do not need to be raised. Personal income
taxes could be reduced while implementing a decent basic income.

Keywords Universal basic income – Cost – Savings – Public finance

– Demogrant – Negative income tax (NIT)
Richard Pereira
is Doctoral Researcher at the University of Birmingham, UK, and was
formerly an economist with the House of Commons in Canada.
Introduction
This study demonstrates that a universal basic income (UBI) or
guaranteed income at a level sufficient to cover essential needs (at
the official poverty line or higher) is affordable. It provides a
response to a popular objection by many writers who claim
otherwise. Their objection is based on inadequate and/or misleading
information. This will be demonstrated by analysis of influential
publications in the Canadian context, as well as investigating the
basis of the objection in more general, non-geographically specific
terms. No cuts to vital public programmes such as health, education,
legal aid and so on are sought in this study. Only programme
redundancies (sometimes full programmes and partial redundancies
in other cases) resulting from implementation of UBI are identified,
along with other public revenue losses that can be better directed to
UBI. The result is to improve the resiliency of health service delivery
and access to education, while ensuring universal income security at
reduced public cost.
I will outline the cost objection to UBI in the first Section “The
Argument: It Is Too Expensive to give the entire Population Basic
Income” and I will then give several responses to this objection in
the second Section “Four Responses: Savings and Other Income
Sources”. In the first response to the cost objection (“First Response:
Savings from Replacement of Existing Income Security
Programmes”), I will highlight the savings possibilities of a UBI
model in contrast to existing welfare models. The second response
(“Second Response: Inefficiencies and Leakages in the Existing Tax
System – No New Taxes!”) will address the claim that personal
income taxes have to be raised to an unacceptable level to finance
UBI by focusing on tax leakages in the existing system. Bureaucratic
costs will then be considered separately as a wasteful element in the
current welfare system (“Third Response: Freedom from
Bureaucracy”). This will offer additional financing to UBI. The final
response (“Fourth Response: Externalities and Current Free-Riding”)
considers other sources of financing, which could be relied on if
required. These sources would not require us to raise personal
income taxes (or taxes on labour income). This fourth response
concentrates on existing economic externalities and free-riding,
which if addressed can simultaneously improve the economy, social
and health outcomes, and ecological sustainability while raising
additional revenue for basic income. An appendix summarizing the
findings on programme redundancies and other savings commonly
overlooked in the cost objection to UBI is included and can serve as
a guide to the reader throughout the chapter.
In proceeding through the study, incomplete calculations of UBI
net costs by prominent authors will be evaluated critically. This
allows me to conclude that a UBI at a decent level (at the poverty
line or slightly higher, distributed to individuals) is feasible, does not
require personal income tax increases and can even lead to personal
income tax reductions.

The Argument: “It Is Too Expensive to Give

the Entire Population Basic Income”
The cost objection to UBI is one of the most persistent arguments
against basic income encountered in the literature. It is often
reinforced by advocates of UBI in different and unsubstantiated
ways. Subsection “A Common Theme in the Literature” will briefly
present the scale of this problem and objection more generally. A
specific presentation of the objection will follow in subsection “A
Country-Specific Illustration of the Cost Objection” based on a case
study of one country. This will allow for illustration of major
omissions in the objection to begin to surface. Recent Canadian
studies that strongly put forth the cost objection will be featured
with their most important arguments highlighted.

A Common Theme in the Literature

Critics of UBI, and surprisingly many advocates of the proposal (both
strong and weak advocates), claim the financial cost for a UBI at a
decent level is out of reach. Critics ignore many savings and other
aspects available with UBI implementation. Advocates often fall into
the trap of the critics’ incomplete arguments by accepting deficient
cost assessments as valid. As a result, many UBI advocates claim
that although they support the idea and see its many justifications,
the cost issue makes it a distant reality or a barrier that necessitates
UBI being introduced at such a low level that renders it almost
meaningless.
In the case of Van Parijs (1995) – a strong advocate – he makes
a novel and useful argument to surmount this artificial barrier, but it
is needlessly complex. Readily available, non-controversial and
numerous savings and funding sources exist as I shall demonstrate,
and Van Parijs fails to properly consider these. He claims UBI will be
insufficient unless society reconsiders jobs as collective “assets”; a
potentially large new political project that may put off
implementation of UBI for an unacceptable amount of time. White
(1997) – a moderate/tentative advocate – agrees with Van Parijs
that UBI will not be substantial without jobs being considered as
collective assets (although White rejects this proposal).
Numerical justification is sorely lacking in these types of
prominent cost assertions (Van Parijs 1995: 90, 103–06; White
1997: 315, 321–22, 326). This study rejects the critics’ cost
objection as well as the weak positions of UBI advocates on the cost
issue. Savings arising from implementation of UBI present a much
greater amount of financing than both critics and most advocates
seem to realize. Van Parijs offers the following perplexing assertion
for instance, which is not supported by any evidence, in his prologue
to chapter 4, which this chapter and book demonstrates to be
unsubstantiated. “Even a very brief look at the relevant figures
should tell you that the basic income you have justified in this way is
pathetically low” claims Demos, to which the response comes “I
know, and this puzzled me for a while.…Moreover, no attempt to
spot…more subtle forms of wealth transfer seems to yield anything
substantial.”
A Country-Specific Illustration of the Cost Objection
In a major study produced for the Canadian Centre for Policy
Alternatives (CCPA), a think tank supported by the Canadian Labour
Congress, unions and other “national progressive organizations”,1
Margot Young (Associate Professor of Law, University of British
Columbia) and James Mulvale (Associate Dean of the Faculty of
Social Work, University of Regina) (2009: 24) provide such examples
as to the cost of UBI, or Guaranteed Income (GI), for Canada:

Grants paid to Individuals (population data 2006).

Program Cost (billions)
Grant of $15,000 per year paid to all individuals age 18 and
over $392
Grant of $15,000 per year to individuals age 18 and over,
plus a demogrant of $4,000 per year for each child under
18$418
Payments only to individuals and families below the poverty
line to bring them up to the LICO (i.e. reduction of poverty to
zero) (2003 data) $21.5

With the exception of the third option, these are large numbers
relative to the scale of the Canadian economy ($1.45 trillion GDP in
2006; over $44,000 for every man, woman and child in the country
(Statistics Canada 2007a), and over $1.8 trillion GDP in 2013
(Statistics Canada 2013)2). In a separate section of their Table 1,
below these intimidating numbers, Young and Mulvale (2009: 24)
outline the “Cost of existing income security programs (2005)”.
These include Old Age Supplement, Child Tax Benefit, Provincial
payments to individuals (e.g. income assistance) and four other
items totalling $135 billion per year. The net cost of the “relatively
generous guaranteed income option” above ($15,000 per adult,
$4,000 per child) according to them is $286 billion, and they state
that “It thus appears that a full-fledged version of guaranteed
income is out of our immediate financial reach” (Young and Mulvale
2009: 25).
 In a footnote at the end of the study linked to the $286 billion
figure above (n 55), Young and Mulvale write that “This figure does
not take account of the additional income tax that would be paid
with a guaranteed income system in place. This additional revenue
could lower the net cost of the benefit by 20 to 30 per cent” (Young
and Mulvale 2009: 34). They do not specify where this additional
income tax generation will come from; whether it is from the obvious
fact that people’s incomes will be higher by the UBI amount, thus
corresponding with a higher income tax bracket, or other possibilities
in addition to this. And they do not provide the dollar figure of this
lower net cost item, which is valued as high as $85.8 billion.3 Other
possibilities for additional income tax generation are numerous with
introduction of UBI and Young and Mulvale may therefore be
underestimating this aspect. For example, Krozer (2010) explains the
economic multiplier effect UBI will have through broadening and
deepening endogenous consumption. The removal of labour market
work disincentives linked with existing welfare programmes offers
greater labour force participation and resulting increases in taxable
income, as a second example. Emery et al. (2013: 11–14) provide
additional reasons for why productivity and labour-force participation
are currently depressed, which UBI/GAI is uniquely suited to address
based on their results obtained from analysing other universal
income security programmes. Young and Mulvale’s total net cost for
UBI could thus be reduced by up to $86 billion, and possibly more,
on this point alone.4
The LICO level Young and Mulvale use above is one measure of
the poverty line (low income cut-off), with its after-tax level for a
family of 1 person being approximately $15,000 for the comparable
years of 2005 and 2006 (but as high as $17,570 in urban areas with
populations of 500,000 and over). Families of two persons are
deemed by Statistics Canada to have a poverty line income level
(after tax) of approximately $18,000 per year under this
measurement (but as high as $21,384 in urban areas with the
largest populations). Families of three and four persons have poverty
line income levels of approximately $22,000 and $27,000,
respectively, for 2005–2006 (Statistics Canada 2007b: 18).
In his presentation to the North American Basic Income
Guarantee Conference in Toronto in 2012, Jonathan Rhys Kesselman
(Professor, School of Public Policy, Simon Fraser University and
Canada Research Chair in Public Finance) made similar and stronger
claims that a UBI is not feasible in Canada. In a subsequent essay
Kesselman (2013) repeatedly claims the cost of implementing a UBI
is “gargantuan” and leads off with an example of a benefit of
$10,000 per capita. “With Canada’s population of 35 million”
Kesselman writes, “the gross budgetary cost of this basic income
clocks in at a massive $350 billion”. He states further:

Even offsetting this figure by eliminating seniors’ cash benefits

and provincial welfare, the implied additional cost to taxpayers
would be enormous…Income taxes on individuals and
businesses as well as other taxes would need to be sharply
increased. The general public would not tolerate such tax
hikes.… (Kesselman 2013: Section 4)

Kesselman’s numbers are repeated by others in the popular

press. In a media article reporting on the 2012 Basic Income
Congress in Toronto, a $380 billion figure is given as the cost for a
universal Guaranteed Annual Income (GAI) in Canada based on
Kesselman’s presentation (Ternette 2012). The article goes on to
summarize Kesselman as stating that the cost “would require a 25
per cent increase in income tax on the highest earners. He said that
would not be acceptable to Canadian taxpayers, recommended we
forget about a GAI and instead improve our welfare state” (Ternette
2012). Similarly, CCPA Senior Economist and prominent Canadian
anti-poverty activist Armine Yalnizyan repeatedly points to
Kesselman’s work as a deterrent to GAI/basic income, citing the
same $380 billion figure as a main reason.5
It is important to note how other strong claims are linked to the
cost objection, that is, UBI is too expensive, and the increased
taxation required is not politically feasible. Raising “all households
above the poverty line carries severe hurdles of…public finance and
political feasibility that proponents typically neglect” (Kesselman
2013: Introduction). Kesselman (2013: Section 4) writes that “the
personal tax system would be applied to finance the system”. This is
a common argument among objectors to UBI based on cost; that
the amount of new personal income tax that would have to be
applied makes it a prohibitive policy.

Four Responses: Savings and Other Income

Sources
This section will explore items that the cost objection to UBI fails to
consider or develop in reducing the net cost of UBI implementation.
Four categories of items will be explored, providing four responses to
the objection. The first category and response “First Response:
Savings from Replacement of Existing Income Security Programmes”
will respond to the savings issue by considering additional available
savings from the replacement of existing income security
programmes missed by the cost objection. These programmes are
often inefficient, wasteful or disproportionately benefit the highest
income recipients in contradiction of the original intent of such
programmes to provide income security to all. They can be
considered to be redundant with introduction of UBI; redirecting
these programme funds to UBI can be considered a much fairer
universal benefit that comes much closer to the original intent of
these various programmes to increase income security.
Subsection “Second Response: Inefficiencies and Leakages in the
Existing Tax System – No New Taxes!” responds to the claim that
personal income tax would have to be raised to an unacceptable
level to fund UBI. This is not true as there are significant leakages in
the existing tax system, which can provide a large amount of
funding without raising taxes. The next subsection “Third Response:
Freedom from Bureaucracy” will consider the cost of bureaucracy.
This response demonstrates that bureaucratic costs associated with
existing programme spending have not been factored into the net
costing for UBI. The final category and response “Fourth Response:
Externalities and Current Free-Riding” will consider new sources of
income through pricing of current externalities and free-riding as an
additional source of financing for UBI (if required). This includes
prevention of environmental and social dumping, and curbing
harmful activities such as excessive financial speculation.

First Response: Savings from Replacement of Existing

Income Security Programmes
In this subsection, two leading cost objections to UBI in Canada will
be briefly critiqued for their narrow savings considerations. The
programme redundancies available by implementing UBI are greater
than presented in these studies. A parallel will be drawn with other
nations that have similarly elaborate bureaucratic welfare states as
Canada. These states should also consider a far greater number of
savings items when drawing up cost assessments for UBI at the
national level. I will then explain various programmes and existing
costs that can be considered as savings if a UBI is implemented –
both in Canada and in countries with equivalent programmes and
costs. Starting with the Registered Retirement Savings Plan (RRSP)
tax shelter, I will demonstrate the redundancies that are missed by
the cost objectors in arriving at the mistaken conclusion that UBI is
financially out of reach for governments. This is a conclusion only
reached by neglecting numerous existing costs that are redundant
with, and better addressed by, UBI.
While Young and Mulvale (2009) do identify some of the savings
to be realized from a basic income programme, Kesselman (2013)
emphasizes the $350 billion cost figure without identifying any total
programme costs that become redundant or unnecessary with
introduction of basic income. The replacement of some existing
income security systems made possible by UBI will provide a
significant amount of savings for funding UBI. Young and Mulvale
identify seven programmes that are, or could be seen as, redundant
with a basic income in place, but do not go further. There are many
more programmes and savings to be considered. The seven
programmes they list are: Old Age Supplement ($29 bn), Child Tax
Benefit ($9 bn), Provincial payments to individuals/welfare payments
($32 bn), GST and other tax credits ($15 bn), Employment
Insurance (EI) ($14 bn), Local payments to individuals ($3 bn), and
a seventh item treated in a confusing manner because it is first
included then excluded in a subset of their Table 1 (with the subset
including two other items equivalent in cost), namely Canada
Pension Plan/Quebec Pension Plan (CPP/QPP) ($32 bn). The
CPP/QPP is properly excluded ultimately by Young and Mulvale
because it is a contributory scheme, and I would argue the same for
EI which is curiously treated differently by Young and Mulvale and
included in the list of programmes to be eliminated with introduction
of UBI.
In Canada, as in many other countries, seven such items (or six if
EI is maintained) that reduce the net cost of UBI would be
considered a very short list. There are many more forms of income
security and related programmes that can be considered as
redundancies with introduction of UBI, specifically a UBI at the level
Young and Mulvale identify which meets the goal of ensuring no
individual’s income is below the poverty line.6
The RRSP programme is one of dozens such programmes that is
not mentioned by any of the authors above. It is a retirement
income supplement programme and tax shelter that
disproportionately benefits high-income earners, contributing to the
regressive tax system currently in place (nominally progressive, but
regressive once such skewed programmes, benefits, deductions and
other advantages are factored in).7 There was $775 billion of assets
in Canadian RRSPs in 2011 (CBC 2013) accumulating tax-free growth
from stock markets and other investments. Annual tax deductions
alone from the RRSP program (and similar registered pension plan
(RPP)) cost the federal government $20 billion per year with two-
thirds of this benefit going to the richest 10% of Canadians
(Department of Finance 2014: 18; Lee and Ivanova 2013: 23–26;
CAW n.d.). This is exclusive of foregone tax revenue on unearned
income within this tax shelter. These figures also do not include the
provincial portion of income tax deducted and refunded to RRSP
(and RPP) contributors. Only 24% of eligible tax filers contributed to
the programme in 2011 (down from 26% in 2010) (CBC 2013), as
many are too indebted, underemployed, precariously employed,
unemployed or working full time and earning too little to have the
necessary disposable income to take advantage of such schemes.
“Many low-income Canadians can actually be worse-off if they
contribute to an RRSP” (CAW n.d.).
Other similar programmes that are not considered by the cost
objectors as unnecessary with the income security provided by basic
income include the Tax-Free Savings Accounts (TFSAs 2014) tax
shelter,8 Registered Education Savings Plans (RESPs) and numerous
other tax shelters with even far less potential to help anyone in need
than these three mentioned above (Taylor 2007).9 Charitable
programmes and the associated donation and tax deduction system,
with highly favourable tax deduction rates could also be vastly
reduced or eliminated with a basic income in place. Whereas almost
30% of Canadians claimed charitable donations in the early 1990s,
the figure was 23% in 2011. “Fewer and fewer people are donating
larger amounts…And spouses with higher incomes can also claim
contributions made by their partners” (Simms 2013). Almost six
million Canadian tax filers claimed charitable contributions in 2011.
In addition to billions of dollars in donations annually to the “poverty
industry” as some have called the growing charitable sector, and the
favourable tax deductions associated with them, charities also often
receive additional funds and grants from various levels of
government, and in too many cases scandalously high salaries and
perks are given to executives and managers of these often otherwise
well-meaning endeavours – directing these various costs towards
funding a UBI could prove far more efficient and be yet another
savings element neglected by the studies.
Summarizing up to this point some of the more obvious
additional savings not included in the cost objections, one finds up
to $86 billion or more in the Young and Mulvale study which they
Another random document with
no related content on Scribd:
accessible by the widest array of equipment including outdated
equipment. Many small donations ($1 to $5,000) are particularly
important to maintaining tax exempt status with the IRS.

The Foundation is committed to complying with the laws

regulating charities and charitable donations in all 50 states of
the United States. Compliance requirements are not uniform
and it takes a considerable effort, much paperwork and many
fees to meet and keep up with these requirements. We do not
solicit donations in locations where we have not received written
confirmation of compliance. To SEND DONATIONS or
determine the status of compliance for any particular state visit
www.gutenberg.org/donate.

While we cannot and do not solicit contributions from states

where we have not met the solicitation requirements, we know
of no prohibition against accepting unsolicited donations from
donors in such states who approach us with offers to donate.

International donations are gratefully accepted, but we cannot

make any statements concerning tax treatment of donations
received from outside the United States. U.S. laws alone swamp
our small staff.

Please check the Project Gutenberg web pages for current

donation methods and addresses. Donations are accepted in a
number of other ways including checks, online payments and
credit card donations. To donate, please visit:
www.gutenberg.org/donate.

Section 5. General Information About Project

Gutenberg™ electronic works
Professor Michael S. Hart was the originator of the Project
Gutenberg™ concept of a library of electronic works that could
be freely shared with anyone. For forty years, he produced and
distributed Project Gutenberg™ eBooks with only a loose
network of volunteer support.

Project Gutenberg™ eBooks are often created from several

printed editions, all of which are confirmed as not protected by
copyright in the U.S. unless a copyright notice is included. Thus,
we do not necessarily keep eBooks in compliance with any
particular paper edition.

Most people start at our website which has the main PG search
facility: www.gutenberg.org.

This website includes information about Project Gutenberg™,

including how to make donations to the Project Gutenberg
Literary Archive Foundation, how to help produce our new
eBooks, and how to subscribe to our email newsletter to hear
about new eBooks.