Guaranteed basic income could cut poverty on Prince Edward Island by 80%: report

Report out Wednesday says how much program would cost and how to pay for it

Guaranteed basic income could cut poverty on Prince Edward Island by 80%: report
Guaranteed basic income could cut poverty on Prince Edward Island by 80%: report

By Kevin Yarr

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A detailed report on guaranteed basic income released Wednesday morning says it would mean 65 per cent fewer P.E.I. children would be living in poverty, along with 90 per cent fewer people who live alone — and poverty could be virtually eliminated for people with disabilities.

“A Proposal for a Guaranteed Basic Income Benefit in Prince Edward Island” was written by a coalition of public servants, politicians, and advocates from P.E.I. and across the country. It outlines how a five- to seven-year demonstration program might work in the province, including how much it would pay to individuals, and how it might be paid for.

“This report establishes beyond doubt that a province-wide guaranteed basic income in P.E.I. is feasible and realistic,” Jane Ledwell, a member of the P.E.I. Working Group for a Livable Income, was quoted as saying in a news release.

Benefits drop as income rises

The report proposes a maximum annual benefit equivalent to 85 per cent of the weighted average of P.E.I.’s three estimated regional poverty line thresholds for 2022. That would amount to $19,252 for single adults and $27,227 for families of two adults.

Benefits would be based on net income for census families. By using census families, the report authors account for adult children living with their parents. Those children might themselves have low incomes while living in a census household with a high income.

To avoid disincentives for working, the basic income would be reduced by 50 cents for every dollar of net income.

Children are not included in family size counts, because the Canada Child Benefit already provides income-tested funding for them.

But Island children currently living in poverty would see big benefits, the report argues, with the poverty rate falling from 9.0 per cent to 3.1 per cent. The poverty rate for people living alone would drop from 27 per cent to three per cent. Overall, the poverty rate would fall from 10 per cent to two per cent.

Higher earners to pay bulk of costs

The report proposes that P.E.I. offer the program in conjunction with the federal government.

The full cost of the program would come to an estimated $189 million in the first year, and the authors propose the province pay 35 per cent of that.

The report outlines paying for the provincial share through higher taxes, aimed in particular at higher-income earners.

The provincial sales tax would go up one percentage point, with an offsetting increase in the HST rebate for lower-income earners. This would increase provincial revenues by an estimated $28.5 million.

The top marginal income tax rate would increase from 16.7 to 19.4 per cent, raising another $21.4 million.

The reports’ authors believe the plan would mean a savings of $17.4 million as social services spending goes down.

For middle-income earners, the report estimates the tax cost at a few hundred dollars a year. For top earners, the increase quickly rises to close to $2,000. Those top earners would pay for close to half of the program.

A guaranteed basic income would have benefits for the province that are difficult to quantify, the report says. In general, it says, better living conditions would lead to better long-term outcomes in health, education, housing, community involvement and other areas.

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