Anti-poverty tax credit would lead to health savings

Posted on June 16, 2013 in Health Debates – Opinion/commentary – It’s time for a modern experiment with a guaranteed annual income.
Jun 14 2013.   By: Simon Lewchuk

What do Andrew Coyne, the Green party, and the Conference Board of Canada have in common? They’re all onto a relatively simple idea that could help solve a significant conundrum being discussed in Ottawa right now: the high toll poverty is taking on the health of Canadians.

Members of the federal All-Party Anti-Poverty Caucus heard recently from Dr. Anna Reid, president of the Canadian Medical Association. Income, the CMA says, is critical to health, and accounts for up to 50 per cent of health outcomes since it is linked to education, early childhood development, housing, social exclusion, food security, physical environment, and other social determinants of health. It’s a message they’re taking on the road as part of their national dialogue tour.

According to the CMA, people living in poverty are almost twice as likely to be hospitalized. They experience higher rates of disability, mental illness, cancer, heart disease, and diabetes. Poverty is making them sick.

But there’s more: poverty is putting an incredible strain on our health-care system and taxpayers’ dollars. Studies have estimated as much as 20 per cent, or $41 billion, of total health-care spending in Canada can be attributed to income disparities.

Wouldn’t raising poor people’s incomes above the poverty line go a long way in fixing the problem?

Year after year, billions of dollars are being spent to provide woefully inadequate social assistance rates that trap people in poverty and poor health (in 2009, the average welfare income for a single employable person was about $9,775 below the poverty line). Many of those who are working aren’t any better off: low-paying, precarious employment means that the working poor now account for 40 per cent of all poor households.

The status quo isn’t working.

Yet for an average upfront cost of about $10,000 for each of Canada’s 3 million people living in poverty, we could top up their incomes so they were above the poverty line. This would lead to dramatically better health outcomes and significant savings. It’s exactly what Conservative Senator Hugh Segal is proposing with his idea for a refundable anti-poverty tax credit.

Administered automatically through the tax system like existing tax credits, it wouldn’t require any additional bureaucracy. People would simply have to file a tax return and, if their total income was below the poverty line, it would automatically be topped-up through monthly payments. By putting money directly in the hands of people who need it, an anti-poverty tax credit would be a tool for empowerment and dignity and stand to save all of us money in the long run.

The additional $30 billion that would be required to implement this is no small sum, but it would be offset as health-care costs were reduced and more people on current social assistance programs were able to work thanks to the security of an income guarantee that would eliminate the so-called “welfare wall.”

Segal’s proposal is just one possible variant of what’s known as a “guaranteed annual income,” a system designed to ensure everyone, without condition, has an income that meets their basic needs and allows them to participate fully in society. It would be available to every Canadian who might need it, whether they were unable to work due to a disability, or if they were unemployed, precariously employed, or staying home to care for a loved one.

Canada has already tested a GAI — in a 1970s study in Manitoba, funded by the provincial and federal government of the day. Among the many other positive outcomes of the GAI experiment, researchers found — unsurprisingly — that hospitalizations declined significantly for the GAI recipients.

It’s time for a modern day GAI experiment. Just as the federal government recently invested in the multi-year, multi-city<online_link name=”online_link” displayname=”online_link”> project that demonstrated the effectiveness of the “housing first” model in addressing homelessness, why don’t they partner with a handful of provinces to test Segal’s refundable anti-poverty tax credit idea?

The idea for a GAI is starting to catch on (cue Coyne, the Greens, and a growing number of equally diverse Canadians). During Ontario’s prebudget consultations this spring, Glen Hodgson, the vice-president and chief economist of the Conference Board of Canada, suggested to MPPs that it’s time for Ontario test the feasibility of a GAI. “It’s a big idea where it’s really come time for a debate,” Hodgson told the finance committee.

Cash-strapped provinces and the federal government can’t afford to ignore new ideas for reducing poverty and health care costs. An anti-poverty tax credit is worth exploring. What do we have to lose?

Simon Lewchuk is a policy analyst with Citizens for Public Justice, a member-driven, faith-based public policy organization in Ottawa.

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One Response to “Anti-poverty tax credit would lead to health savings”

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