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Introduction: Maturity of Basic Income and Its Prospects in Canada and Elsewhere Read chapter Read first chapter

2021 | OriginalPaper | Chapter

6. Emergence of the Negative Income Tax in Canada (the 60s and 70s)

Author : Prof. Wayne Simpson

Published in: Is Basic Income Within Reach?

Publisher: Springer International Publishing

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Abstract

The 1960s marked a period of nation building in Canada which also included the introduction of a guaranteed income benefit for seniors, the Guaranteed Income Supplement and the first serious studies of low family incomes. Evidence of widespread poverty led to calls for a negative income tax and agreement for the Manitoba Basic Annual Income Experiment (Mincome) that emulated the U.S. experiments but added a unique saturation site in Dauphin. While the experiment quickly yielded useful administrative lessons, resource limitations in an inflationary environment shelved data development and slowed analysis. As in the U.S., the 1970s began with serious deliberation of a negative income tax but ended with the idea of a guaranteed income seemingly forgotten and little to show for a multimillion dollar experiment.

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previous chapter Basic Income in the Twenty-First Century (the 00s and 10s)
next chapter Development of a “Basic Income” in Canada (the 80s and 90s)
Footnotes
1
The adage is attributed to Austrian politician Klemens von Metternich who, during Napoleonic times in the nineteenth century, argued that “when Paris sneezes, Europe catches a cold,” reflecting the influence of France at the time. See, for example: https://​rigllc.​com/​blog/​when-america-sneezes-the-world-catches-a-cold/​.
 
2
Peter Newman’s (1978) assessment of Pearson and his governments dwells on its many scandals and other deficiencies but also notes that Pearson was a man of “compromise, conciliation, tolerance and diversity” and perhaps that was what was most needed for political survival in the socially turbulent 1960s. It was certainly needed in federal-provincial relations and, in particular, in discussions with Québec and its place in confederation during this period.
 
3
The Act provided for provincial discretion over generosity and income-testing arrangements but capped the federal contribution at $20 per month.
 
4
The OAS payment and hence the GIS were indexed to the cost of living after 1967 under the Old Age Security Act.
 
6
MacEachen used the examples of a small pension and part-time work as sources of income for pensioners that should not be taxed at a prohibitive 100% rate, as a Senate committee had then proposed.
 
7
The Economic Council of Canada Act of 1963 is reprinted in Economic Council of Canada (1964a, 14–19).
 
8
Noting that 1961 was the trough of a business cycle, the Council estimated that the poverty rate may have fallen to about 20% by 1965, perhaps influenced by comparable results found in the U.S. (Council of Economic Advisers 1964). In any case, the range of estimates for the two economies were notable in their similarity.
 
9
Indigenous persons were referred to as “Indians, Eskimos and Métis” at the time but included both on-reserve and off-reserve families as would be the case today.
 
10
Statistics Canada never referred to the LICO as a poverty line, preferring to refer to it simply as a low-income cut-off, and it was never adopted as an official poverty line by the Government of Canada. It has, however, been regularly used in public discussions to assess poverty in the absence of an official standard until recently.
 
11
The budget standards for basic needs would be those used by the provinces to determine levels of social assistance (welfare payments).
 
12
Derek Hum was my long time colleague and research collaborator who became the Research Director for the Manitoba Basic Annual Income Experiment and a careful student of Canadian social policy. I rely heavily on his expertise and interpretation of events for this period.
 
13
For a comparison of the specific family size adjustments and the poverty lines by family size used in Mincome with the Statistics Canada (LICO) and Senate poverty lines of the day, see Hum et al. (1979, Tables V.2 and V.3).
 
14
See Table 3.​2, which summarizes the treatments for the four U.S. experiments.
 
15
As in the U.S. experiments, it was important to design NIT plans that would be attractive in comparison with social assistance to ensure participation and discourage attrition. This carried over to the treatment of wealth.
 
16
A number of now familiar panel surveys were in the early stages of development, including the Panel Study of Income Dynamics and the Current Population Survey in the U.S. and the British Household Panel Survey. Lee (2003) has analysed attrition rates for these surveys.
 
17
This was the period of stagflation where the unemployment rate in Canada and Winnipeg was also rising but only from about 5.5 to 8.4%, not nearly as steeply as in the case of Seattle.
 
18
Sabourin et al. (1979) determined that the completed interviews were sufficient to estimate eligibility and participation rates within a 95% confidence interval if the potential bias arising from non-random interview completion was ignored.
 
19
I am not aware of any results from the Rural experiment on the impact of the accounting period on labour supply or other behavioural outcomes. In any case, those results geared to agriculture and the rural poor would have limited applicability to the larger urban setting of the U.S. or Canada.
 
20
Revenue Canada, now the Canada Revenue Agency, required individual tax filing so all returns for the same family had to be aggregated. The major components of family income in Mincome and Revenue Canada were comparable but Basilevsky and Sproule (1979) discuss the discrepancies that could not be resolved.
 
Literature
Basilevsky, Alexander, and Robert Sproule. 1979. The Accuracy of Income Reporting in Mincome Manitoba. Technical Report No. 10 of the Manitoba Basic Annual Income Experiment. Winnipeg.
Basilevsky, Alexander, Derek Hum, and Donald Sabourin. 1979. Income Reporting Behaviour in a Negative Income Tax Program: A Comparison of Retrospective and Prospective Reporting Methods in Mincome Manitoba. Technical Report No. 9 of the Manitoba Basic Annual Income Experiment.
Bryden, Kenneth. 1974. Old Age Pensions and Policy-Making in Canada. Montreal and London: McGill-Queen’s University Press.
Cohen, Andrew. 2008. Lester B. Pearson. Toronto: Penguin Canada.
Crest, David, Carol Billett, Derek Hum, David Komus, and Andrew Quarry. 1979. The Administration of the Payments System of Mincome Manitoba. Technical Report No. 4 of the Manitoba Basic Annual Income Experiment. Winnipeg.
Department of National Health and Welfare. 1970. Income Security for Canadians. Ottawa: Queen’s Printer.
Economic Council of Canada. 1964a. Annual Report: Fiscal Year 1963–64, June. Ottawa: Queen’s Printer and Controller of Stationery.
Economic Council of Canada. 1964b. First Annual Review: Economic Goals for Canada to 1970. Ottawa: Queen’s Printer, December.
Economic Council of Canada. 1965. Second Annual Review: Towards Sustained and Balanced Economic Growth. Ottawa: Queen’s Printer, December.
Economic Council of Canada. 1966. Third Annual Review: Prices, Productivity and Employment. Ottawa: Queen’s Printer, November.
Economic Council of Canada. 1967. Fourth Annual Review: The Canadian Economy from the 1960’s to the 1970’s. Ottawa: Queen’s Printer, September.
Economic Council of Canada. 1968. Fifth Annual Review: The Challenge of Growth and Change. Ottawa: Queen’s Printer, September.
Hum, Derek, and Wayne Simpson. 1991. Income Maintenance, Work Effort, and the Canadian Mincome Experiment, A Study Prepared for the Economic Council of Canada. Ottawa: Canadian Communication Group Publishing, Minister of Supply and Services Canada.
Hum, Derek, David Crest, and David Komus. 1979. The Design of the Payments System of Mincome Manitoba. Technical Report No. 3 of the Manitoba Basic Annual Income Experiment. Winnipeg.
Hum, Derek, Michael Laub, Charles Metcalf, and Donald Sabourin. 1979. The Sample Design and Assignment Model. Technical Report No. 2 of the Manitoba Basic Annual Income Experiment. Winnipeg.
Hum, Derek P.J., Michael E. Laub, and Brian J. Powell. 1979. The Objectives and Design of the Manitoba Basic Annual Income Experiment. Technical Report No. 1 of the Manitoba Basic Annual Income Experiment. Winnipeg.
Kurz, Mordecai. 1979. An Evaluation of the Experimental Sample of Mincome Manitoba. Technical Report No. 5 of the Manitoba Basic Annual Income Experiment. Winnipeg.
Lee, U. 2003. Panel Attrition in Survey Data: A Literature Review. Centre for Social Science Research 41, University of Cape Town.
Newman, Peter. 1978. The Distemper of Our Times. Toronto: McClelland and Stewart Limited.
Sabourin, Donald. 1979. Sample Development Over Time, Participation and Attrition. Technical Report No. 6 of the Manitoba Basic Annual Income Experiment. Winnipeg.
Sabourin, Donald, Derek Hum, William Harrar, and Alexander Basilevsky. 1979. Program Participation in the Saturation Site of the Manitoba Basic Annual Income Experiment. Technical Report No. 8 of the Manitoba Basic Annual Income Experiment. Winnipeg.
Simpson, Wayne, Greg Mason, and Ryan Godwin. 2017. The Manitoba Basic Annual Income Experiment: Lessons Learned 40 Years Later. Canadian Public Policy 43 (1): 85–104.
Special Senate Committee on Poverty. 1971. Poverty in Canada: Report of the Special Senate Committee on Poverty. Ottawa: Information Canada.
Podoluk, Jenny R. 1968. Incomes of Canadians, Census Monograph. Ottawa: Dominion Bureau of Statistics.
Metadata
Title
Emergence of the Negative Income Tax in Canada (the 60s and 70s)
Author
Prof. Wayne Simpson
Copyright Year
2021
Book
Is Basic Income Within Reach?

Print ISBN: 978-3-030-66084-0

Electronic ISBN: 978-3-030-66085-7

Copyright Year: 2021

DOI
https://doi.org/10.1007/978-3-030-66085-7_6