SEPTEMBER 2021 |
55
UNIVERSAL
Basic Income
by Brandon Currie
Financial series: Part 4 of 6
This 6-part series explores Universal Basic Income (UBI), providing fundamental knowledge necessary to reach informed opinions.
n part 3 we discussed how a UBI program could be implemented in an unmodified form. Anything can work on paper, but what about reality? A no-brainer, assuming the conclusions reached in the Mincome experiment stating the workforce would not suffer a loss in numbers, holds true. So we begin by determining cost. Statistics Canada supplied the following data for the year 2019: To implement a non-taxed, no conditions UBI benefit of $2,500/month or $30,000/year, it would cost our federal government $911B. The programs it would replace currently represent $221B, meaning UBI would account for 67% of the total federal government’s revenue, leaving $330B for everything else. These numbers do not work.
1. Using the average income of $58,700, CPP would be significantly underfunded as the employee would only be contributing on his/her remaining $28,700 of income. 2. The purpose of CPP is to provide a retirement income covering approximately 25% of a worker’s pre-retirement income. If no contribution is being made against the $30,000 UBI benefit it would mean, based on the average income in Canada in 2019, that 51% of earnings are not being accounted for in the retirement benefit, greatly impacting retirement allowance.
Let’s explore the significant reduction of social programs. The following is a list of federal and provincial programs that would no longer be needed beyond the age of 18: Employment Insurance (EI) Federal Paid by both employee and employer to receive 55% of employment income, up to a maximum of $54,200 adjusted to inflation annually. The maximum benefit is $573.27/ week, taxed. ►►►
finance & investment
• 30,366,622 people aged 18+ • Approx. $284B total taxes collected • Federal contribution to social programs was $221B • General Government Revenues (all sources) totalled $940B • $58,000 average annual salary
To offset the $911B expense, we must challenge the basic tax-free, no conditions concept by inserting a small tax component and mandatory CPP contributions. An employee currently pays 5.25% on every dollar earned from $3,501 - $58,700, which creates a contributory base of $55,200 (58,700 - 3,500 = 55,200). If an earner does not contribute to CPP on the first $30,000 of income (the annual UBI) it creates two problems:
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