Funding Options for Basic Income (UBI Works)

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1	Funding Options for Basic Income that don't tax most Canadians or productive investment
2	Accompanying UBI Works Article: How to Pay for Basic Income
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4	Summary
5	Net Cost of Guaranteed Basic Income (GBI)	$ 50,705,000,000
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7	Funding options that don’t tax most Canadians or productive investments	$ 52,200,000,000
8	Contributions from our financial sector	$ 15,100,000,000
9	Fewer tax breaks for large companies	$ 18,700,000,000
10	Fewer subsidies for the wealthiest	$ 18,400,000,000
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12	Cost Estimates	Amount	Source	Note
13	Gross Cost of Guaranteed Basic Income (GBI)	$ 80,871,000,000	PBO (Nov 2020)	Gross cost for a Guaranteed Basic Income (GBI) that guarantees all Canadians aged 18 to 64 an income of at least 75% of the Low-Income Measure (LIM; approximately $24,400 for an individual and $34,600 for a couple in 2020-21), reduced by $0.50 per dollar of employment income, and dollar for dollar of EI and CPP payments. Excludes supplemental disability cost in anticipation of a potential new Canada Disability Benefit.
14	Fiscal offsets from federal & provincial programs that can be replaced by GBI	$ (30,166,000,000)	PBO (July 2020)	Annualized potential fiscal offsets from federal and provincial programs that could be replaced by GBI ($15.083B for a 6-month period).
15	Net Cost	$ 50,705,000,000
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17	Our plan is designed for following criteria:
18	1. Does not materially impact households earning less than $100,000/year (91% of tax filers), and in many cases not even $150K/year (97% of filers).
19	2. Does not discourage entrepreneurship and private capital investment and encourages economic growth.
20	3. It is feasible: it works within our existing tax code or has strong international precedent.
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22	Tax Reform	Amount	Source	Description
23	Contributions from our financial sector
24	Financial transactions tax (FTT) of 0.25% on wealth portfolios	$ 7,800,000,000	Vivic Research	A financial transactions tax is a fee or duty placed upon the sale, purchase, transfer, or registration of a financial instrument, which is already in effect in major jurisdictions including Hong Kong, UK, France, and Italy. This tax would fall predominantly on those who have large financial portfolios, which are disproportionately among the wealthiest Canadians.
25	Financial activities tax (FAT) of 4% on financial institutions (banks, insurance)	$ 7,300,000,000	Vivic Research	A financial activities tax – a tax on total profits and remuneration in the financial sector – is another revenue-generating mechanism available to the federal government that is currently used in Québec, France, the United Kingdom, Denmark, and Israel.
26	Fewer tax breaks for large companies
27	Apply corporate tax rate to multinationals based on the proportion of sales in Canada	$ 6,100,000,000	Vivic Research	This measure proposes that the net income of multinational enterprises (MNEs) be taxed in Canada based on the share of the MNE’s global sales that occur in Canada. The proportion of net income that firms allocate to Canada would be taxed at the domestic corporate tax rate.
28	Restrict interest deductibility to no more than 20% corporate earnings	$ 2,500,000,000	Canadians for Tax Fairness	This measure proposes restricting interest deductibility to no more than 20% of corporate earnings income before interest, taxes, depreciation and amortization (EBITDA) for corporations with net interest expenses of more than $150,000.
29	Eliminate carbon tax preferences for large emitters and introduce a carbon border tax	$ 3,000,000,000	Canadians for Tax Fairness	This measure proposes to apply an equal carbon tax rate to all emitters thus ensuring a more equal and effective carbon pricing regime.
30	$1 million cap on business deduction for executive pay	$ 500,000,000	Canadians for Tax Fairness	Not only has executive and other high-level compensation continued to escalate through the pandemic, but Canadian corporations can deduct these growing amounts from their income for tax purposes, unlike in the US, where there’s a $1 million limit per executive. Limiting this tax-deductible expense to $1 million per employee would save the federal government $500 million annually.
31	Minimum 15% corporate tax on corporate book profits for large corporations with income over $1B	$ 1,000,000,000	Canadians for Tax Fairness	Many large corporations are able to pay no tax or receive tax refunds even when they report profits to their shareholders. Just as the US Department of the Treasury proposed in 2021, Canada should introduce a minimum corporate tax of 15% on book income for large corporations with income of over $1 billion.
32	Passive income tax of 10% (earned in corporations)	$ 3,900,000,000	Vivic Research	This proposal would implement a new 10% non-refundable tax on all passive investment income earned in corporations (i.e., adjusted aggregate investment income).
33	Withholding tax of 1% on the value of business assets held in tax havens	$ 1,700,000,000	Vivic Research	This proposal would implement a 1% withholding tax on the value of assets held by Canadian corporations in recognized tax havens.
34	Fewer subsidies for the wealthiest
35	Eliminate 50% capital gains exemption except on corporate shares	$ 8,300,000,000	Vivic Research	This proposal would eliminate this exemption on all forms of capital gains except for corporate shares (including mutual funds). The intent behind exempting returns from corporate shares is to preserve incentives for productive investment.
36	Convert the RRSP/RPP Tax Deduction into a 15% Refundable Tax Credit	$ 8,700,000,000	Vivic Research	This measure proposes that RRSP and RPP contribution deductions be reformed to a refundable tax credit valued at 15% of the contribution. The current deductions offered through RPPs and RRSPs reduce the amount of taxes paid by filers. In contrast, a refundable tax credit would provide a payment to filers equal to 15% of the the amount of money contributed to the RPP or RRSP in a year.
37	Gradually eliminate the BPA from bottom of 4th federal tax bracket to 5th (top 3% of tax filers, $151,978 up to $216,511, 2021 federal tax rates)	$ 1,400,000,000	UBI Works	This tax reform would gradually increase the inclusion of the basic personal amount, a non-refundable tax credit, from 0% at the bottom of the 4th income tax bracket to 100% at the top of the bracket ($151,978 up to $216,511; 2021 federal tax rates, which is approximately the top 3% of tax filers), to be taxed at the lowest rate of 20.5%.
38	Total Funding Options	$52,200,000,000
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40	Other factors that could reduce the true cost of Basic Income	Amount	Source	Description
41	National cost of poverty	$80,000,000,000+	Ontario Association of Food Banks	The cost of poverty in Canada has been estimated at $73 to $86 billion a year. This includes the increased costs to our healthcare, justice and social services systems, the intergenerational costs of poverty, and the staggering losses to productivity that result from systemic poverty. The $4.3 billion in downstream cost savings already factored into the net cost likely only account for a small fraction of the total cost of poverty. This estimate by the Ontario Association of Foodbanks was published in 2008. The cost of poverty has very likely increased significantly since then, making $80 billion a conservative estimate.
42	Potential tax revenues from increased economic activity	$10,000,000,000+	Vivic Research	Basic income could produce an economic multiplier effect, where each dollar invested into basic income spurs more than a dollar of economic activity and a resulting increase in tax revenues. We already see this with the Canada Child Benefit, a basic income for families: each $1 invested results in $2 of economic growth, and 55 cents of that is recouped in taxes from economic activity. See 'Funding Projections' on page 32 for estimates of additional tax revenue multipliers across various funding scenarios, which show a lower bound of $10B in additional yearly tax revenue multipliers in the first 5 years.
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