Tax reform and social safety
CITIZEN'S INCOME / GUARANTEED ANNUAL INCOME

Several problems

Social democrats have traditionally been clear in affirming that the objectives of economic profitability and social equity are not incompatible. This is manifestly true. But we cannot hunker down behind this fact to justify the status quo in terms of social policy.

Our social safety net was put into place between the 1950s and 1970s in a very different economic context, namely a situation of nearly full employment, and unequalled and continuous economic prosperity. This system has nevertheless reached its limits. Governments of both the left and right have recognized that the current social protection programmes have been monumental failures in their principal objective of getting people out of poverty.

The Canadian government manages an enormous network of programmes and measures targeted according to particular clienteles: pensions, insurance programmes, income support programmes, tax credits, etc. This system has the disadvantage of being extremely complex. It generates enormous administrative and bureaucratic costs. This complexity also confuses citizens, who sometimes fail to claim the benefits to which they have a right because they do not even know they exist.

The existing programmes -- targeted to clienteles meeting certain criteria -- can have the effect of stigmatizing certain people (for example, social assistance recipients, the unemployed, single-parent families). These programmes are conditional and are thus necessarily more intrusive than universal programmes. Despite the fact that each of these measures (programmes, tax credits) is justified in its own right, taken together they tend to be regressive and inefficient in their application. And despite the large number of particular measures, many people are covered by none of them: they fall between the cracks in the system.

Certain income security programmes unfortunately offer disincentives to work. Some people, working full- or part-time at the minimum wage have real net incomes that are barely higher than they would have been had they been on an income security programme. This situation penalizes people trying to ³get out² by closing them into a ³poverty trap.² Income security currently causes labour market rigidities and offers little support to people who lack access to Employment Insurance or who are in transition from unemployment to work, or from one job to another.

Some solutions

During a first mandate, we will implement a citizen's income. This will be a universal benefit, uniform and non-taxable, paid to every citizen, regardless of his or her social and economic circumstances, from birth until death. The guaranteed annual income responds to the criteria of simplicity, equity and solidarity.

Simplicity and Effectiveness. The citizen's income could replace a number of existing tax credits and programmes that are targeted to specific clienteles. Many programmes could over time be fused into a single one that did not require administrative surveillance and intrusive investigations into people's private lives. Even a modest citizen's income would reduce the distortions linked to these targeted programmes. This will hopefully mean a significant simplification of taxes for families over the medium term.

Equity and Social Justice. A guaranteed annual income reduces socioeconomic inequalities by providing a base amount to everyone on an individual basis rather than on the basis of household income. The objective is to significantly improve the situation of the first quintile (the poorest 20% of the population), and particularly social assistance recipients, people « without cheques », the working poor, and those in precarious work. Even while offering a work incentive, the guaranteed income is a direct means of fighting poverty that does not stigmatize or label a whole segment of the population. The citizen's income will increase the stability and predictability of income and will thereby allow families -- particularly those with low incomes -- to budget better. Finally, the guaranteed income offers recognition -- even if indirect -- of unpaid labour, such as that of stay-at-home parents.

Solidarity. The guaranteed income will be accompanied by a significant tax reform. The guaranteed income will allow for the creation of a social transfer system where all people receive a direct transfer and where all people, beyond this basic amount, will pay taxes. It will therefore be a powerful instrument of social solidarity by reducing the cleavage between « tax payers » and the beneficiaries of government programmes. We must stop thinking of a social safety net -- created for the poor -- and start thinking of a social development springboard created for everyone.

We are going to proceed progressively, in stages. During a first mandate, we will establish the guaranteed income in the range of $1600 to $2000 per year, taking the economic context into account.

• The first step will be to eliminate the existing personal basic tax credit and the GST credit, in order to pay out the equivalent in guaranteed income;
• We will then eliminate certain tax credits and deductions and transfer the savings into the guaranteed income;
• Then, following consultations, we will increase the universal guaranteed income and replace other tax deductions and government programmes;
• We will claw-back the citizen's income paid to the fourth and fifth quintiles (the richest 40%) through the tax system;
• The citizen's income will involve no cuts to transfers to provinces for health and education;
• We will not touch provincial programmes, but we will open discussions with provinces in the hopes of encouraging them to follow in the direction of a citizen's income.