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Opinion  

Unconditional income?

By Charles Lammam and Hugh MacIntyre

Almost 50 years ago, a Canadian Senate report declared that a basic income "is an idea whose time has come." Ever since, the idea resurfaces every so often, with support that spans the political spectrum.

Most recently, a Parliamentary Budget Office report reinvigorated the debate by estimating the cost of a particular version of a basic income program. Proponents, including columnist Andrew Coyne, go so far as to claim a basic income will end poverty.

In our view, however, an unconditional basic income is a bad idea whose time should never come. In theory, a basic income would replace the existing web of income-support programs (welfare, the GST tax credit, Old Age Security, employment insurance, etc.) with a single simple program that provides a cash transfer to Canadians.

The PBO's version is based on a pilot program in Ontario and would provide a maximum unconditional cash transfer of $16,989 for single Canadians (couples would receive $24,027).

There are several reasons why this is a bad idea.

A basic income would weaken the incentives to work for lower-income Canadians and people not strongly tied to the labour force (i.e. youth, secondary earning spouses) in two important ways.

First, the transfer doesn't have a work requirement - even for able-bodied recipients - which raises serious concerns about the potential to encourage dependency on government and discourage people from improving their situation through gainful employment.

Second, because additional income earned triggers a reduction in the transfer amount, a basic income will discourage additional work effort or the willingness to report additional income. In the PBO's version, $1 of extra income results in a 50-cent reduction in the transfer. The total effective tax rate on employment income - 50 per cent from the basic income clawback, plus personal income and payroll tax rates, and potentially other reduction rates in government income-support programs - would be significant.

Experiments in Canada and the United States in the 1960s and '70s with various designs of basic incomes showed that recipients - especially married women - respond by reducing the hours they work. More broadly, however, proponents of an unconditional basic income ignore the lessons from Canada's welfare reforms in the mid-1990s and early 2000s, when stronger work requirements and tighter eligibility rules helped reduce dependency.

In 1994, 12.2 per cent of Canadians were on social assistance and welfare benefits reached levels comparable to what a full-time minimum wage job would pay. Partly in response to this growing crisis in dependency, governments across Canada reformed their welfare systems. Reforms varied by province, ranging from tighter eligibility rules, to work-related requirements (such as job search), to reduced cash transfers.

These reforms helped dramatically reduce the share of the population on welfare - fell by almost half, from 12.2 per cent in 1994 to 6.3 per cent in 2012. The U.S., with a similar set of reforms, also experienced a marked decline in welfare.

But if income was unconditionally provided, as prescribed by many basic income models, irrespective of working or even searching for work, we shouldn't be surprised if fewer Canadians end up working.

Claims about an unconditional basic income solving poverty oversimplify what's often a much more complex problem. It's important to recognize the differences between transitory poverty, which almost all Canadians experience (for instance, when they're in university or college) versus long-lasting or permanent poverty, which is much more worrying.

The root causes of long-lasting poverty go beyond a simple lack of income. Issues such as addiction to drugs or alcohol, mental health challenges, severe physical disabilities and not completing high school increase the risk of chronic poverty. A cash transfer with no restrictions may either exacerbate the problem or not address why someone is stuck in poverty.

Proponents from across the political spectrum promote the idea of an unconditional basic income. But clearly, the drawbacks are significant and should give us all pause.

Charles Lammam is director of fiscal studies and Hugh MacIntyre is a senior policy analyst at the Fraser Institute. 

– Troy Media



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Rethink nominations

By Dermod Travis

It was hardly front page news on the west coast, but St. John's lawyer Ches Crosbie, son of former Progressive Conservative MP John Crosbie, was elected the new leader of the Newfoundland and Labrador Progressive Conservative Party last month.

It's noteworthy because three years ago, the Conservative party of Canada, rejected Ches' federal candidacy, claiming in his words that "decision-makers at party headquarters in Ottawa decided I wasn't the type of candidate they wanted."

Papa Crosbie was characteristically a little more blunt: "The audacity of some small, unknown committee of people up in Ottawa that could have this power...is not only insulting, it's a disgrace...I can't explain my scorn and disdain. I am am really browned off!"

At least Ches received an explanation of sorts, former CBC producer George Orr was left high and dry by the B.C. Green party in 2016, when his candidacy was rejected.

Former B.C. cabinet minister Terry Segarty had the door slammed on him, when he tried to seek the B.C. Liberal party nomination in Kootenay East for the 2017 election.

Like Orr, Segarty received no explanation from the party, although he believes it may have been tied to the prosecution of an escort agency, the Top Hat, in 1985 that his name had been wrongly tied to, as well as his age.

According to Segarty, former Kootenay East MLA Bill Bennett advised him that “the premier was recruiting persons of good character and high morals.”

Bennett also told the 69-year-old Segarty that his age and health were factors. West Vancouver-Capilano Liberal MLA Ralph Sultan is 84.

The B.C. NDP was not immune to similar challenges as it wrestled with its gender equity rules in Columbia River-Revelstoke.

The latest to fall victim to a green light crippling is Vancouver Non-Partisan Association (NPA) councillor Hector Bremner – who was seeking that party's nomination for mayor until the backroom bosses did him in this week – despite the committee approving his candidacy.

Here's how NPA president Greg Baker explained the board's decision to overrule the committee to the Globe and Mail: “the committee “had significant concerns about his answers and about how he answered some questions on the application. They thought it was better for Hector not to put them on paper.”

Today, prospective party candidates are put through a rigorous vetting process. Some of it with reason, some of it that may cross a line, but all of it with one big proviso: lips sealed on the findings.

In its 51-page package the NPA asked candidates whether they or the potential candidate’s company has been involved in any lawsuits for cause, unfair or illegal employment or labour practices; ever lost judgment in any legal proceeding; or ever been audited by the Canada Revenue Agency?

The party also required a $2,500 application fee, a detailed plan to raise $250,000 in campaign funds, a list of the names of 300 eligible members who support his or her candidacy and within five days of being green-lighted “evidence [is required] of $40,000” in the potential candidate’s campaign account and a $25,000 nomination deposit payable to the NPA.”

A provincial political party asked prospective candidates for a “list of all full-time or part-time employment since you graduated from high school and a list out all email addresses and social media accounts the candidate used in the past 10 years.”

Vetting isn't always full proof. Former federal Conservative candidate Jerry Bance didn't disclose that he had urinated in a coffee cup in a customer's home, as captured on tape by CBC's Marketplace. 

For rejected candidates, though, the process often leads to the “wonder what that cloud hanging over their head is” – I heard he had a business problem, no someone else told me it's booze, no you have it all wrong he cheated on his spouse.

Orr may have had the kibosh put to his candidacy for the Greens over something he wrote in the 1960s, others over ill-advised social media postings (albeit sometimes rightly so) and the repugnant inferences that Bremner has experienced from Baker.

But lips sealed. No one who is privy to the vetting – or being vetted – can talk about it in most cases.

Bremner says he has “no secrets.” 

The NPA owes it to him – and other parties owe it to their future candidates – to lift the clouds that can get left hanging over candidates that a party feels are not up to snuff for members to consider at a nomination meeting. 

As a sometime lobbyist, Bremner may be a conflict of interest waiting to happen, but surely NPA members deserve more than “insinuations” from its president.

As one political observer put it: “how political parties function themselves must be as democratic as the system they operate in. They are not analogous to a private club.”

Dermod Travis is the executive director of IntegrityBC



Saga of three pipelines

By Gwyn Morgan

Canada is endowed with the third largest oil reserves in the world but lack of access to world markets means our oil is sold far below world prices. Each day, this captive market discount hands a $40-million gift to Americans. Adding insult to injury, the discount also drives tens of billions of dollars in Canadian investments to American oilfields.

Now, after seven years and billions of dollars spent by proponents of three oil export pipelines, hope for revival of Canada's oil industry has come down to one extremely troubled project. How could this have happened?

The answer lies in politically-motivated decisions that progressively narrowed those three proposals to what was always the most fraught project. Here is a precis of what I'll call The Saga of the Three Pipelines.

Enbridge filed regulatory applications for the Northern Gateway pipeline to the north Pacific port of Kitimat in 2010. The cabinet of Stephen Harper's Conservative federal government approved the project in 2014, after a thorough and intense review by the National Energy Board (NEB).

However, in September 2016, less than a year after taking office, Prime Minister Justin Trudeau cancelled the project, stating: "The Great Bear Rainforest is no place for a pipeline." It mattered not that the "Great Bear Rainforest" hadn't even been designated during the regulatory process.

Some First Nation bands were pleased, but not those most affected by the loss of employment and financial benefits. Just weeks ago, the Lax Kw'alaams, representing nine First Nations tribes, filed a lawsuit claiming that the Great Bear Rainforest prohibition against development on their traditional lands shouldn't have been implemented without their consent.

The tragic irony is that Northern Gateway could have been built by 2019. And, unlike overheated Vancouver, it would have created jobs and economic benefits in a part of the province that is suffering economic despair.
In 2014, TransCanada filed regulatory applications for the Energy East project to move Canadian oil to refineries in Montreal and New Brunswick, while providing vital access to Atlantic tidewater. The project would have replaced the hundreds of foreign-flagged oil tankers that sail up the St. Lawrence each year carrying half a million barrels per day to Montreal. Moreover, Energy East would use existing pipelines formerly carrying natural gas.

The project had all the hallmarks of a win-win nation builder.

But, in the face of strident opposition from politically influential Quebec, the Trudeau government imposed an "upstream emissions test" on Energy East, blatantly ignoring the emissions emanating from foreign oil suppliers and those hundreds of tankers carrying their oil. The government then announced a restart of the entire NEB regulatory hearing process with newly-appointed board members.

Realizing that the Quebec votes were more important to the government than their project, TransCanada abandoned it after spending $1 billon.

The Trudeau government's cynical and politically-motivated elimination of Northern Gateway and Energy East left the Trans Mountain pipeline expansion as the lone route to tidewater.
It should have been perfectly clear that the project would face vastly more strident opposition than the other two projects. Trudeau provided justification for that opposition during the federal election campaign of 2015, attacking the NEB as lacking "public trust." The very same NEB that's respected worldwide for its technical expertise and unbiased professionalism. And the NEB that had served both Liberal and Conservative governments with distinction for decades.

Trudeau's campaign rhetoric was a calculated attack on Harper and his Conservatives, but it also wreaked grievous damage to public confidence in the regulatory process. Now Trans Mountain opponents, including angry protesters chaining themselves to construction sites, use the prime minister's words to support their claims that NEB approval of the project was flawed. The City of Burnaby has even stated it will not fund the RCMP's cost of protecting construction crews.

Finally, after investing $1 billion, Kinder Morgan's responsibility to shareholders left the company no choice but to suspend construction and set a firm deadline for project cancelation unless the conditions for completion are in place.

Over the nine months since the Green Party-controlled NDP government of B.C. vowed to use "all the tools in the toolbox" to stop the Trans Mountain expansion, the prime minister and members of his cabinet have repeatedly stated the project will be built. But no action was taken to enforce federal jurisdiction to make that happen.

Now, for Trudeau, the oil industry and the country, the saga of the three pipelines has exploded into a national crisis. The stakes are no longer just a crucial route to tidewater, but also a test of Ottawa's constitutional jurisdiction over nationally important projects, a destructive breakdown in relations between two provinces and very possibly a national unity crisis.

Having made the unfathomable decision to fly away as this crisis escalated, the PM decided to return to Ottawa. He arrived with the fanfare of a knight arriving to save the day but it was already clear that there was no chance of changing B.C.'s avowed opposition.

In reality, it was B.C. Green Party Leader Andrew Weaver, not Premier John Horgan, who should have been invited to the meeting with Trudeau and Alberta Premier Rachel Notley since the very survival of B.C.'s NDP government is in Weaver's hands.

Now we await announcement of what actions the Trudeau government will take to save Trans Mountain. Taxpayers should hang onto their wallets, as both the federal and Alberta governments have signalled funding of the $7.4-billion project is an option. That would be a lamentable but unsurprising chapter in a saga wherein politics killed the first two pipelines, only to have their killers force taxpayers to pay for their mistakes by funding the third.

Gwyn Morgan is a retired Canadian business leader who has been a director of five global corporations.

– Troy Media



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No tax cut for middle class

By Charles Lammam, Jason Clemens and Hugh MacIntyre

With tax season just behind us, many Canadians are realizing the full weight of the income taxes they paid in 2017. And some may wonder about the much-heralded middle-class tax cut promised by the governing Liberals.

In reality, very few Canadian families received an income tax cut.

It's important to understand the exact nature of the personal income tax cut implemented by the federal government in 2016.

The second lowest federal income tax rate was cut from 22.0 per cent to 20.5 per cent, which for the 2017 tax year applied to income between $45,916 and $91,831. That means the maximum income tax reduction amounted to $689 in 2017.

However, other income tax changes were also introduced concurrent to this rate reduction.

First, the government introduced a new top rate of 33 per cent for professionals, entrepreneurs and business owners.

Second, a number of tax credits, which act to reduce a person's income tax bill without reducing their marginal tax rates, were also eliminated. The government eliminated tax credits, including income-splitting for families with children, children's fitness, public transit, education and the textbook tax credit.

Examination of two of these now-eliminated tax credits helps to highlight why so many middle-class families experienced a tax increase rather than the much-hyped tax cut.

Families that previously claimed the fitness tax credit, which had a maximum value of $150 per child in 2015, now incur the same costs - but with no tax relief. The elimination of this tax credit could and likely did increase taxes for individuals and families that used it before it was cancelled.

The income-splitting tax credit had an even more deleterious effect on the tax bill for those who previously claimed it. This tax credit was meant to partially mitigate the rather large difference in taxes between families with similar income but with different earning patterns. Families where one earner receives most of the income pay higher income taxes than families with the same total income but who have the earnings split more evenly between multiple earners. Families that previously used the income-splitting tax credit could experience an increase in their federal income taxes of up to $2,000.

When you put all the tax credits eliminated together, you get a very different perspective on the total income tax changes implemented by the government.

So while income taxes could have been reduced by a maximum of $689, the elimination of the income-splitting and fitness tax credits means they could have been increased by a maximum of $2,300. (This assumes a family with two kids claimed the maximum value of the income-splitting and child fitness tax credits, none of the other now-eliminated tax credits, and was not exposed to the higher income tax rate of 33 per cent.)

In fact, a recent study estimated that 81 per cent of middle-income families in Canada (with family incomes between $77,089 and $107,624) experienced a net tax increase, with families paying $840 more per year on average.

More telling, it's basically single individuals with no children (with incomes between $45,916 and $202,800, the income level before the 33 per cent rate kicks in) that benefited from the tax cuts, while families, particularly those with children, experienced tax increases.

So while the Liberal platform of reducing middle-income tax rates is a good one, it was accompanied by other tax reforms that raised marginal tax rates on entrepreneurs, investors, professionals and business owners - as well as tax measures that in many cases totally offset the income tax rate reduction.

The result is that income taxes have been raised on most Canadians over the last two years. This will worsen on Jan. 1, 2019, as the Canada Pension Plan payroll tax increases. That means virtually all Canadian families will experience a net tax increase.

Charles Lammam, Jason Clemens and Hugh MacIntyre are economists with the Fraser Institute.

– Troy Media



Electric cars won't save us

By Lee Harding

Anyone who says electric cars will save the world is dreaming.

The adoption of electric cars over the next 20 years will barely shave a single per cent from the world's greenhouse gas emissions.

Meanwhile, the batteries that power these cars rely on a nightmarish swath of human devastation. Most electric car buyers who pride themselves on doing the right thing have no idea of the birth defects, premature deaths, child labour and virtual slavery it took to make their new wheels move. All this is to keep carbon out of the air and a few hundred ducks out of oilsands tailing ponds.

Electric batteries have far more to do with cobalt than carbon. Cobalt is an essential element in lithium-ion batteries, the lighter kind that packs more energy than lead-acid batteries. It is true that these 'green' batteries are found in tech devices and not just cars. But the 10 grams of cobalt for a smartphone battery or the ounce in a laptop are overwhelmingly outweighed by the 15 pounds of cobalt found in a typical electric car battery.

On the face of it, this would seem to be good news for the nation of Congo, which has about 60 per cent of the world's known cobalt reserves. But so far Congo has only traded desperation for exploitation.

Papy Nsenga digs for cobalt by hand, like 100,000 other people in Congo. There is no salary and even on a good day he will only make $3 for what he finds. Deaths and injuries are common. But when a mine collapsed and crushed a digger's leg and injured another's head, Nsenga had to raise the hundreds of dollars for medical treatment from his fellow workers.

The companies that buy the cobalt rarely help. "They don't care," a government mine inspector told the Washington Post in 2016. "To them, if you bring them minerals and you're sick or hurt, they don't care." The inspector said he has pulled 36 bodies out of mines. The day before his interview, he rescued four miners overcome by fumes from an underground fire.

Yes, there are gasses and pollutants worse than carbon dioxide. Ask the cobalt miners.

Cobalt mine pollution is taking its toll not only on miners, but on other people and wildlife in the area. Doctors at the University of Lubumbashi found the urine of residents who lived near mines and the smelters in southern Congo had 43 times as much cobalt, five times as much lead, and four times as much cadmium or uranium as normal. Nearby fish also had high levels of metals in their flesh.

Soils sampled near mine-intense Lubumbashi indicated the region was "among the 10 most polluted areas in the world." Babies fathered by miners are more likely to have visible defects, including those of the rarest kind, such as mermaid syndrome. The Post met one 15-year-old mother who said both she and her doctor were frightened by the sight of her newborn son.

"We shouldn't have to live like this," Nsenga said.

"We are suffering," said fellow digger Nathan Muyamba, 29. "And our suffering is for what?"

Their suffering, says the world's farcical joke, is to save the Earth by decreasing the carbon footprint of cars.

On Feb. 25, Bloomberg told us, "Why Charging Your Electric Car at Night Could Save the World." On March 15, Wired followed up with, "Even More Evidence that Electric Cars Could Save the Planet."

But these statements are hollow hype. Even if the International Energy Agency is right and 280 million electric cars replace gas-powered ones, the impact in 2040 would only be one per cent of greenhouse gas emissions.

Death and destruction, all for one per cent. Occupy Congo, anyone?

Lee Harding is a research associate for the Frontier Centre for Public Policy.

– Troy Media



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