Letter to the Editor – Universal Basic Income

Dear Editor,

This is in response to the Op-ed dated November 2, 2023 “Why UBI does, in fact, work”. The author, in a rebuttal to the article by Brandon Mayer, refers to the UBI (Universal Basic Income) in Alaska. However, it is actually a “resource royalty program” (Alaska Permanent Fund) that is paid as a dividend to every Alaskan resident. In 1983 it was $386.15 and in 2023 was $1,312. For 2017, the dividend was $1,100 per person or $5,500 for a family of 5 and varies by year depending on the Fund’s performance. And it is indeed “universal” since you receive the dividend, rich or poor, unlike any UBI. Mr. Smith is correct regarding the report entitled “Labor Market Impacts of the Universal and Permanent Cash Transfers”, but this was because the transfers were small and so no one could quit a job on that income. The income is subject to federal tax (top U.S. federal tax rate of 37%), not state income tax, as there is no Alaskan state income tax.

In the same article, Finland experimented with a “UBI” from 2017 to 2019. The unemployed received 560 Euros/month ($840 Cad in 2018 dollars), regardless of what they earned on top of that. In the end, it is unlikely that the program will be expanded to cover a larger population. Bear in mind that Finlanders pay 51.6% top personal tax rate (2018), the corporate tax rate is 20% and sales tax is 24%.

The Fraser Institute recently released a report using some basic assumptions 1) the cost of a national GAI (Guaranteed Annual Income) would be fully funded by tax increases (not deficit financing) 2) GAI would be in addition to other social net plans as demanded by Peter Julian, NDP MP. There were two models of GAI proposed (see the report for details). If the “tax the rich” (those earning over $250,000) proposal is used to raise the monies for the low cost model GAI (131.9 billion cost), only 87% of the cost would be covered by collecting the entire disposable income of the “rich”. For the high cost model ($464.5 billion), the “rich” could cover 25% of the cost. In a 2021 letter to the editor, a UBI proponent mentions the $40 billion wealth of the Canadian Thompson family. If Canada took all the wealth of that family, the GAI would be covered for 3.6 months under the low cost model and just over a month under the high cost model. And after that, every wealthy family would leave Canada! Who would the ‘left’ tax then?

The other option is to cover the GAI with increased GST (Federal Consumption tax) which would be applied to all ‘consumers’. The low cost model would require a GST increase from 5% to 26.25% and the high cost model would raise the GST to 105.35%.

Willem Van Dam