Comparing Systems for Basic Income: Finding the Ideal

1. Comparing Systems for Basic Income: Finding the Ideal Based on a 2018 discussion paper of the same name Rory Davis (PhD Student) University of Western Ontario

2. Structure of Comparison Systems for Basic Income • Negative Income Tax (NIT) • Job Rents • Resource/Land Value Tax (Alaska) Reference point • Ontario Works and Ontario Disability Support Program (ODSP) Comparison Criteria • Justice • Freedom • Sustainability • Achievability

3. Analysis Criteria • Freedom • Is about how much money is being provided • Is about what opportunities that the new financial aid presents • Is about freedom from the many pitfalls of weak social security, including: • The welfare trap (welfare wall) • Stigmatization • Watchdog mentality and policing the poor • Is about gaining a mentality of security and shedding the mentality of scarcity • Justice • Is about where the money is coming from • Does it operate alongside or replace other social programs? • Is new taxation considered? • Is redistributive justice a goal? • Is about who has access: • Is the program about universality or limited access? • What is the inclusion/exclusion criteria?

4. Analysis Criteria • Sustainability • Is about protecting the program from erosion • Decreasing benefits • Limiting accessibility • Weak social security • Is about preserving the incentive to work • Economies support benefit systems • Is about maintaining functionality, political support, and cultural legitimacy • Achievability • Is about getting the program implemented/making basic income a reality • It is sensitive to the current political climate • It is skeptical of plans that involve a lot of change (especially all at once)

5. Program Analysis Applying the 4 criteria to Evaluate: Negative Income Tax (NIT), Job Rents, Land/Resource grants (Alaska), and Ontario Works/Ontario Disability Support Program

6. Negative Income Tax (Ontario) • Freedom • More money is granted than Ontario Works/ODSP • 45% LIM vs. 75% LIM • Greater opportunities in life decisions affected by income • Changes to administrative apparatus are aimed to tear down the “welfare wall” • Mixed gains for combatting stigmatization of those in poverty • Benefits still only accessed by the poor • But watchdog/policing reduced • Justice • Wealth redistribution is not a priority • Limited access: only those below ‘break even point’ benefit… leaves the door open to reintroduce “workfare” principles • Ex. Socially productive labour requirement • Aims to scrap administrative apparatuses to save money– transfer those savings to welfare recipients • i.e. raise funding from the bottom instead of the top

7. Negative Income Tax (Ontario) • Sustainability • The program does improve the work incentive relative to Ontario Works • Claw backs and punishments for prudent behaviour (working, saving) are removed • But, a key population of stakeholders are removed: welfare workers • Due to downsizing administration to save on admin costs • Achievability • A lot of momentum exists for the NIT system of basic income • Test sites include: Finland, Scotland, Netherlands, Uganda, and Ontario • Could be some danger in Ontario of pilot being abandoned if a government change happens June 7, 2018 • Same fate as Mincome (1970s) • NDP initiated 1974 • PC cancelled 1979

8. Job Rents • Freedom • All opportunities from NIT + softening of the need to preserve the work incentive • Can “opt out” of employment • Absence of job envy • Product of rent system • Changes are aimed to eliminate ‘bad jobs’ • Have no one work an undesirable job for insufficient compensation • Justice • Is not about wealth redistribution • Hierarchy of earning is maintained • But, the top earners are ‘anchored’ to the lowest earners since the more envy their position inspires the higher the rent to hold onto that job • Counter force to opportunity hoarding • It becomes less financially rewarding to restrict access to the best jobs due to ‘scarcity’ driving the rent price up • Universal Access • Everyone must participate

9. Job Rents • Sustainability • If fully implemented and enforced (prevent rent dodging) then the system is protected and self-perpetuating • Applying job rents totally interweaves social security (welfare provision) with employment • It is insulated from spending cuts by governments • The system would be affected by economic downturns, depressions, recessions, and capital flight • Achievability • Job rents are the most theoretical and most utopian of the basic income systems • A lot of revamping of existing institutions would have to take place • As well as a cultural shift away from the “work to eat” principle that is embedded in our understandings • The system runs counter to corporate interest and corporations have a significant sway over politics

10. Land or Resource Tax(Alaska’s Permanent Fund Dividend) • Freedom • Fairly modest, but significant dividend (affected by value of a resource; ex. Oil) • Moderate purchasing power increase • No work requirement; only citizenship requirements • For Alaska, this means present in the state for a minimum 180 days • Also, incarceration would devoid payment • Also, illegal immigrant status means no payment • Justice • Is progressive in its transparency (no government misallocation of funds) and requirement of business social responsibility (taxation on resource extraction) • It also operates alongside other social service programs • It is not a welfare replacement, it is a supplementary income • It may be somewhat contentious in how citizenship requirements are fulfilled – as various court challenges illustrate

11. Land or Resource Tax(Alaska’s Permanent Fund Dividend) • Sustainability • It could be a weakness that the dividend relies on the existence of finite resources and industries committed to extracting them (and paying taxes) • In terms of popular support, the program in Alaska is enshrined in the consciousness of citizens • They conscientiously defend it • Achievability • As a program that has functioned for over 30 years in Alaska the citizen’s dividend has proven achievable in a specific location • However, not all territories have a rich natural bounty to justify the dividend through resource taxation • If approached as a land tax instead, achievability might decrease but sustainability would increase

12. Ontario Works • Freedom • The thrust of the program is to prevent parasitism • Assumes welfare recipients are second class citizens who need a paternalistic push back to work • Heavy emphasis on stigmatizing the recipients of welfare as ‘lazy’ or ‘frauds’ • Prudent behaviour like saving or working is punished by clawbacks of welfare aid • The welfare wall or “welfare trap” • Exacerbated by precarious employment • Justice • The claim to justice is the alleviation of taxpayer burden • However, the funds cut from social welfare do not necessarily equate to benefits for the average citizen • (Contingent on where the government reallocates funds) • Weakening the social safety net can be considered an injustice based on the criteria of this study • The program is not about reducing poverty • The program is about restricting access and creating obstacles to receiving aid

13. Ontario Works • Sustainability • In terms of program cost Ontario Works could be said to work as a sustainable model • Economically (in spending terms) • Affordability is given priority over functionality • The weakness of Ontario Works as a social security system might actually result in less survivability for the program itself • It enables more functional systems (basic income) room for greater appeal • BUT, Ontario Works has been in place with little change since 1997 (21 years) • Achievability • This system is easily justified on purely economic terms • So long as the costly impacts (impaired health, crime, etc.) are not considered • It was achieved by harnessing cultural bias (stigmatizations) against those in poverty and promising tax cuts • Anecdotes about welfare cheats, drug use, laziness • Biasing the population against welfare claimants is necessary to legitimize political rhetoric for spending cuts • “Us vs. Them” mentality

14. Interpretative Ranking • Freedom • 1 – Job Rents • 2 – Negative Income Tax • 3 – Land/Resource Tax • 4 – Ontario Works • Justice • 1 – Job Rents • 2 – Land/Resource Tax • 3 – Negative Income Tax • 4 – Ontario Works • Sustainability • 2 – Negative Income Tax • 2 – Job Rents • 3 – Ontario Works • 4 – Land/Resource Tax • Achievability • 1 – Ontario Works • 2 – Land/Resource Tax • 2 – Negative Income Tax • 4 – Job Rents

15. Relative System Strengths/Weaknesses

16. Conclusions • The point of this discussion paper was not really to crown a champion basic income program. The point was moreso to make suggestions that can integrate into an achievable basic income system. • These suggestions would be aimed to improve a program by focusing on freedom, justice, and sustainability • Based on the criteria used, and the analysis conducted, the Negative Income Tax system does seem to be the best step forward for basic income in Ontario at this time.

17. Recommendations • There are some changes that could be made that would make it even better: • Using a universal demogrant instead of the strict Milton Friedman model is more effective vs. stigma (greater freedom) • Being more proactive about a progressive tax on the wealthy would achieve greater justice • This probably cannot be taken to the point of job rents or a de facto ‘maximum wage’, but even small steps in this direction are commendable • It is problematic to overemphasize administrative cost savings • the elimination of certain stakeholders (welfare agents) is a blow against sustainability • Increasing the income tax/corporate tax burden on the wealthy is one alternative, but a balance must be struck to avoid capital flight and overly damaging outcomes for Ontario’s economy • One route is to learn from Alaska’s program and incorporate natural resource and land tax (dividends) to operate alongside the new income tax system • Negative Income Tax already has a good amount of momentum behind it; and this achievability is what makes it the ideal system to build upon

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