What is basic income, and how would it impact me?

Parliamentarians are reviewing proposed legislation that would create the first national framework for a guaranteed livable basic income. (Richard Plume / The Canadian Press)

Parliamentarians are considering a pair of bills aiming to lift people out of poverty through a basic income program, but some fear these types of systems could result in more taxes for Canadians who are already financially struggling.

Sen. Kim Pate and NDP MP Leah Gazan introduced bills S-233 and C-223, respectively, in a bid to create the first national framework to provide all people over age 17 across Canada, including temporary workers, permanent residents and refugee claimants, a guaranteed livable basic income. The bills contain the same proposal.

Pate said they created two bills with the same text to increase the chances of having at least one of them passed by the Senate or House of Commons.

"MP Leah Gazan and I wanted to provide the opportunity for both Chambers to study the bill simultaneously," the senator said in an email to CTVNews.ca.

In the Senate, Bill S-233 passed second reading and is under review. MPs debated Bill C-223 in the House of Commons this week.

As these bills undergo scrutiny, CTVNews.ca asked a few experts how a basic income program could affect workers and business owners in Canada.

What is basic income?

Basic income is an unconditional payment the government provides to individuals regularly, according to Coalition Canada, a national network made up of basic income advocates.

"It ensures everyone can meet their basic needs and live with dignity regardless of their work status," the group says on its website.

There are various types of basic income programs.

One approach, called a universal basic income, gives a fixed amount to everybody, every month, regardless of their income, said Jim Dunn, a professor of health, aging and society at McMaster University in Hamilton, Ont., in a video interview with CTVNews.ca.

In this case, even those who are already millionaires could get the same amount of money per month as middle-class or lower-income residents, and people don't have to apply.

Another type of basic income program is a negative income tax, which is more complicated to administer than universal basic income, Dunn said. An example is Ontario's Basic Income Pilot Project.

"Basically they set an income threshold that everybody is going to meet, and whatever you earn in the labour market or on social assistance, they top it up to get you to that amount," said Dunn, who co-led the evaluation of the Ontario basic income pilot, which was cancelled before it was completed.

To be eligible, participants must be below the threshold, which for the Ontario pilot was $16,989 per year for an individual.

In both cases, the government would provide the money and observers expect workers would be paying more taxes since they would be earning more.

How would it affect workers?

Dunn views the income programs as benefiting both workers and businesses.

He said basic income programs can help workers find time to look for the right job, leave an unhealthy relationship, afford health care not covered by public health insurance, and generally improve their lives.

"Sometimes the money allows them to afford transportation that they otherwise couldn't afford to be able to get to a job," Dunn added.

Not only will lower-income workers and people who are un- or under-employed no longer depend on social assistance, but they will also be incentivized to work more hours and thus earn more money, he explained.

Those who receive social assistance have less incentive to do this because they can have their benefits clawed back if they surpass the government's cap on earnings, he said.

Earning more from basic income would result in more taxes, but Dunn argued there are benefits as well. If more people are working and earning more, the government will have higher tax revenues that can be spent on more services and programs, benefiting everyone, he said.

"Sure, they're going to pay more taxes, but they're still going to have more money to spend and to enjoy a better lifestyle," Dunn said.

Having sufficient income can help people solve other problems in their lives, he added.

"There are examples of people leaving bad relationships ... because they now have the financial security to do it," he said.

How will it affect business owners, the economy?

In Dunn's opinion, the positive effect on workers will spill over to businesses.

People with lower incomes tend to have precarious jobs with irregular work schedules, high stress, and other health and safety issues.

With basic income, workers and businesses will feel "more secure" and "more productive," he said.

Fewer employees will be absent from work and workplaces will be more productive because people on basic income won't be coping with the stresses that come with poverty and juggling second jobs, he said.

But Franco Terrazzano, federal director of the Canadian Taxpayers Federation, says a basic income program would result in tax hikes and be "disastrous" for the Canadian economy.

"What specific tax would depend on what the government decides," Terrazzano said in an email to CTVNews.ca. "But it would mean higher taxes to pay for this massively expensive program."

He fears companies will face other challenges as well. "It would also make it harder for Canadian businesses to find and retain talent because if the government pays people not to work, fewer people will work."

Based on Ontario’s basic income pilot project, the Parliamentary Budget Officer estimated that the basic gross cost of guaranteed basic income nationally would range between $30.5 billion and $71.4 billion from November 2020 to March 2021, Terrazzano pointed out.

John Oakey, vice-president of taxation with Chartered Professional Accountants of Canada in Dartmouth, N.S., questions how the government would be able to afford a costly program.

"The problem with putting it in place is there's a consequence," Oakey said in a video interview with CTVNews.ca. "If you introduce universal basic income, which would be a government expenditure, the government would have to finance that and pay for it somehow. Either it's going to continue to run deficits in order to fund that along with all the other programs, or it would have to increase taxes in order to not run additional deficits in order to fund this, or it would have to decrease already existing expenditures."

He said income taxes would be the main source of funding for the federal government's expenditures.

Canada's experience with the Canada Emergency Response Benefit, which contributed to significantly increasing the country's debt, may indicate what a basic income program could look like, Oakey said.

The program provided financial support to workers who lost their income because of the pandemic, but was always meant to be in the short term.

Since the time it was implemented, many Canadians have come forward with stories of being asked to repay thousands of dollars as a result, money they say they don't have.