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

Summary:
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 or 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

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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.

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