A Small Basic Income as a Solution to the Magic List Problem

This post was written by Mike Veall of the Department of Economics at McMaster University.

What if in a future crisis there is again a need to distribute money? As Jennifer Robson put it, “government doesn’t have a magic list with everybody’s name and addresses and bank accounts.”

I was reminded of this when thinking about transmitting money to someone in a less developed economy. How can I be sure it will work? I could send a small amount, confirm receipt, and then send more.

The same approach could create a magic list for Canada. Every month the government could send a taxable $20 or $30 to everyone (except children and seniors, already in the system with monthly benefits). It would be enough money that most people would check receipt, at least occasionally, and hence continually test the system. I think this is much more likely to work than an enrolment system or having CRA try to construct a list.

Then, in a crisis, the government can quickly scale up the amounts, put in clawbacks, whatever it decides.

$30 per month can easily be financed by reducing the personal amount on the personal income tax. If desired, implementation could be made pretty close to distribution neutral by also reducing the GST/HST credit and a couple other tinkers. It would be cheap crisis preparation.

This post is about how to make a magic list, not on the desirability of a more sizable Basic Income. But I note that if a sizable BI would be a good policy, a small one could pave an incremental path. And if it would prove a bad policy, trying a small one first could help avoid a mistake.

Comments

[LJ Gould]

This would give people an incentive to keep their info up to date, but the trick is getting it approved (ESDC & CRA have it for most folks), all past efforts have been rejected on privacy or administrative grounds and I’m not sure this would be any different (given the cost)

It also creates a big burden in getting money to folks who have no fixed address or bank, and happens to be in the nightmare zone for fraud.

Hard as it is to believe in 2020, most of Canada’s landmass has no close access to a bank or permanent connection to the payment transfer system (occasional satellite use instead). There are still 10s of thousands of people who get paid by the gov’t via cash / reloadable debit cards at Northwest Company stores or Giant Tiger. When thinking of “no fixed address” the problem isn’t primarily urban homeless people - turns out most of them have bank accounts and debit cards and the gov’t funds services to help those who don’t have them to set them up - it’s folks who spend months living off the land or, like my uncle, running trap lines for months at a time, up there where banks are scarce, that occasionally pop in to Service Canada to tell the gov’t where to send the retro payments. And there are more of them today than there were 100 years ago!

Monthly payments of $20-30 are a fraud/overpayments nightmare - it’s enough to attract deliberate fraud but small enough that many people who accidentally get double paid won’t notice or be particularly motivated to let the gov’t know right away (with bigger payments they almost always do) and since folks can have more than one address or bank account errors are going to happen. The other worry is it creates an incentive for fraud using fake people. Creating fake people for OAS is hard because you have to fake 40+ years of history interacting with gov’t, and with EI or CPP you have to have paid in to get $ out. Fraud there is mostly claiming someone else’s benefit: and they notice when they get a tax slip if not before (as long as they’re alive). Without that constraint the $ value of fraud would explode.

Bottom line: if the GoC we’re willing it could create that list, even without the payments, at less cost.

[Frances Woolley]

Mike,

Interesting idea. Did you see this piece by on getting CRA to fill out people's taxes for them - some interesting stats there about the rate of non-filing: here?

I actually know someone who doesn't file their taxes, despite being eligible. Part of the issue is dyslexia, which makes it incredibly difficult to cope with government forms.

I know someone else who often misses out on benefits they're entitled too. Part of the issue in this case is anxiety. $30 would not be enough to conquer this person's anxiety.

I'm probably more computer savvy and literate than a lot of people, but I can never figure out how to get Turbotax to import my t4 info, because I can never remember how to log on.

How do we address these kinds of issues - learning difficulties, anxiety, and other ones like distrust of government?

[ROGER SPARKS]

I guess we could begin at birth. Everyone has a birth certificate--right? Hmmm. Maybe not.

I guess those few without a certificate could register when they vote. Hmmm. Some never vote.

You are raising an interesting nuance of the UBI idea. Who really owns economic output and how do we distribute fair-share to owners.