No, 800,000 ineligible Canadians did not receive the CERB.

Today, the National Post published a piece in their Canadian Politics section with the factually incorrect headline “More than 800,000 ineligible people received CERB, as a cost of nearly $1.7B, CRA documents reveal.” (UPDATE: NP changed their headline after this piece went viral–see end of post. ANOTHER UPDATE: NP has now deleted the whole article–see end of post) What is worse is that the second paragraph of the story tells you why that headline is factually incorrect. All you need to a soupcon of tax knowledge to know that. If you don’t have that soupcon of tax knowledge then you should interview tax experts before publishing such drivel. The National Post should be embarrassed at how its bias leads to such disgusting errors.

My loyal Dead for Tax Reasons readers always enjoy a good tax take down, so let’s go!

Here is the first paragraph:

“A Conservative MP says Canada Revenue Agency has some explaining to do after more than 800,000 ineligible people got Canada emergency response benefit cheques.”

National Post

Well first of all, the CERB was a program was administered by Services Canada, not CRA (UPDATE: for all those bitching to the contrary, please see Part II of Bill C-13 that defines the Minister as the Minister of Employment and Social Development). While you could also apply for the CERB through your CRA My Account, that was simply an application option. The main application portal was through the usual Services Canada portal.

The CERB was also delivered on a trust then verify process. The verification process has been ongoing, but has already heated up and will continue in earnest through the upcoming tax filing season. CRA will be one of the entities doing verification. The CERB was intentionally designed that way. To ensure speedy delivery. You know, in the time of an unprecedented economic shock. One that has and continues to hit women, low wage workers, and racialized Canadians more than anyone.

But wait, there is more. Let’s move on to the second paragraph:

CRA’s own records — filed in an inquiry of ministry tabled in the House of Commons — show 823,850 people who didn’t file a tax return in the past year received $2,000 monthly CERB cheques at a cost to taxpayers of nearly $1.7 billion, according to Blacklock’s Reporter.

National Post

I mean holy hell with a tidge of knowledge about the CERB benefit you know this is just clickbait. Was tax filing an eligibility criteria for the CERB? No. Let’s go through this one step by step.

Is tax filing a general legal requirement? Nope, not at all. While there are various corner cases, the most important aspect to tax filing is that only people with a with tax payable to CRA are required to file a tax return. What you say? Yes. Legally, filing is required if you have tax payable. It is not required if you do not. So anyone with a refund owing is NOT required to file. The fact people do file is more because most people (2/3) are owed a refund and really want it or because they actually do not know the rules or want access to tax benefits like the Canada Child Benefit (CCB).

Was tax filing an eligibility requirement for the CERB? No. The eligibility requirement was

You earned a minimum of $5,000 (before taxes) in the last 12 months, or in 2019…

Government of Canada

Yah, guess what, you could have earned $0 in 2019 yet have earned $5,000 in 2020 and be eligible for the CERB. And guess what, WE HAVE NOT FILED 2020 TAX THIS YEAR! The filing deadline for 2020 taxes is currently set for April 30, 2021.

And guess what, you could have earned $5,000 in 2019 and not have filed and be eligible for the CERB. As noted above, tax filing was not a required eligibility criteria. And you can legally not have filed taxes for 2019 and still be eligible. And, you know what, CRA can determine all of this because of third party reporting. What you say? Yes! Hold onto your seats for this one!

CRA uses third-party information reported separately to CRA and matching techniques to verify the information.  Third-party reporting, or matching, is a tax policy concept according to which a third party (i.e., neither the individual nor the tax authority) provides an impartial verification of income. For example, all employers are required to report to the tax authority on a T4 information slip the wage income of their employees, on or before the last day of February of the year following that to which the income information applies. While not all income is subject to such reporting, a significant amount is. This means that CRA actually already knows a fair amount about much, if not all, of the income earned by a significant number of tax payers. So yah, you can not file your taxes and CRA can still assess your eligibility for the CERB. It is almost like it is 2020.

The article also uses the sentence:

The CRA didn’t explain how non-tax filers could have claimed the benefit.

National Post

Probably because people at CRA thought the question must be a joke. I mean, seriously, this is pretty straightforward from all the public information and a tick of knowledge. UPDATE: They’ve since responded, see the end of the post for their response.

The NP article also tries to use the notion that people with high incomes claimed the CERB but did not need and should not have gotten it. The CERB was not means tested. CERB was replacing lost income as the result of the pandemic. THAT WAS INTENTIONAL! Did they lose income? I bet they did. In fact, lots of self-employed people were hit pretty hard a few months in to the pandemic. Contracts were suddenly cancelled, invoices not paid, it was a serious disruption. To suggest such people should not have claimed a benefit they were eligible for while going through a dramatic income shock would also be suggesting that those hit pretty hard by the Oil shock, but who earned a lot money before that, should have been able to sustain themselves. I would hope the CPC MP cited in this article does not think such things. Then again Kelly McCauley is from Edmonton so maybe he does not really understand the Oil shock, after all I am told by the UCP most people in Edmonton are out of touch.

UPDATE: I’ve received two, no wait three (UPDATE: FOUR), emails from Tom Korski from Blacklocks, whose seems a bit befuddled by all this, and seems like a bit of a jerk TBH. Let’s look at the order paper that started all this, happily provided to me by another more reputable (fact checking on tax details) journalist. The question asked was:

With regard to recipients of the Canada Emergency Response Benefit what is the number of recipients based on 2019 income, broken down by federal income tax bracket?

Government of Canada

Now, Tom is all perplexed because if CRA didn’t administer the CERB then why did CRA respond to this question, why were the data tabled in the House by CRA. *Pinches Bridge of Nose* because the question wanted to know the recipients by income. Only CRA has information on people’s income IF they filed their taxes.

Who else then would answer this question? Services Canada does not know your income, they do know your employment income if you had a job loss AND your employer issued an ROE, but that is not complete information about income. But to be eligible for the CERB you simply had to have reduced hours, or lost self-employment income, or reduce provincial benefit income or a job loss. I.e. you did not have to lose a job to qualify for CERB. So the question asked was answered by CRA because they are the only ones who could answer the question. I mean if you asked the same question about GIS, CRA would respond despite GIS being administered by Services Canada.

Tom then asks how would CRA verify $5,000 in employment income is not thru [sic] tax filings. Well see above. It is called third-party reporting. I mean our whole system while it is based on self-assessment it is also based on verification and third-party reporting is the main pillar of verification. CRA actually knows everything about a significant portion of Canadians that for them self-assessment is not needed and we, like many countries, can move to auto filing. What you say? Yes, and if you are interested you should watch the Canadian Tax Journal as a whole policy forum will be dedicated to this!

Tom then doubles down and asks “What is the mystery class of more than 800,000 workers with “employment income” who don’t file taxes?” And he asked this after I sent him a link to my blog. I mean, what is not exactly clear? I don’t know, but if you want to read more see my co-authored piece of tax filing, or Jen Robson and Saul Schwartz’s piece in CPP, or a similar piece in the McGill Law Journal.

Tom, incensed as I did not immediately respond to the aforementioned email, emailed me again with this

Dear Dr. Tedds: no answer, but I won’t hector you further. Knowing your keen expertise in tax issues, you may find it interesting to observe CRA filings indicating, for instance, 1 in 4 Yukoners claimed CERB benefits. That’s 25% of the total population: school-age children, people at the remand centre, hermits, infants, you name it.

In BC claimants outnumbered jobless five to one. I suspect these people may be part of the invisible army of “workers” with “employment income” who operate outside the tax system. I know MPs in all parties who keenly await an audit of this program. We’ll be sure to contact you for comment at the time.

Regards

Well, Tom again wants to believe you had to be JOBLESS to to claim the CERB. No, nope, nadda, not true. I mean, here are the eligibility criteria. The eligibility criteria is related to income loss. Yes it includes job loss, but that is not the sole distinction.

Do we have fraud with the CERB? Yes, see for example this. Do we have errors with the CERB? Yes. The eligibility criteria changed nearly daily before and after it was rolled out. Personally, I am following this case to see what happens. Did some idiot apply for CERB in the name of his horse? IDK, but if he did that would be fraud since you needed to meet the eligibility criteria and the horse clearly does not.

I”ll assume that Tom signed off his email as a form of a threat. But whatever, my writings and opinions on this matter are pretty clear and shared by the likes to Tammy Schirle and Jen Robson, so I am in very good company. In the meantime, Tom goes into the email folder called “Assholes.”

UPDATE 2: CRA provides a response

https://platform.twitter.com/widgets.js

UPDATE 3: After this blog was posted, the National post changed the headline of its article

https://platform.twitter.com/widgets.js

UPDATE 4: The National Post silently removes the article

UPDATE 5: I scanned all the Postmedia newspaper sites and sent emails to every editor of a Postmedia newspaper site that contains the story about 800,000 Canadians being ineligible for the CERB based on factually incorrect information. I have also submitted two complaints with the the National News Media Council, one related to PostMedia and one related to Blacklock’s. I encourage you all to do the same: https://www.mediacouncil.ca/complaint/

The Pandemic Inspired Speech From the Throne

I was sadly in a meeting when the Speech from the Throne was being read, so I am just catching up on the details. I gotta say anyone saying this is not an exciting SFT, which for me are always an eye rolling affair, must not be a women, a parent, a low-income person (working hard to join the middle class), Black, racialized, indigenous, a person with disabilities, and any intersectionality of these. I am hopeful and somewhat inspired, well as best as an economist can be.

The framing is important. “This is our generation’s crossroads.” “This is an opportunity to…build back better, together.” This is the signal many of us have been waiting for, that we finally get that Canada has left many behind, that we can’t continue to paper over the gaps we have in our society and economy, and that we have tackle inclusive growth head on. Right on, man!

To solidify this, the SFT says clearly “This is not the time for austerity.” High Five, sister! We cannot let fear mongers and pearl clutchers worry us into taking action that is only going to allow the gaps in our society and economy to fester any longer. Let’s focus our spending on addressing these and, not said in the SFT but which I hope we see, is lets stop spending in those areas that are not focused on the clear vision set out in this SFT.

What are clear calls to action that are important to this?

First, reforming the EI System of for the 21st century. EI still reflects the work environment of the 1960s and not that of 2020. We should re-envision the EI system to be a better safety net for workers. Because of huge gaps in the EI system, the provincial income assistance systems have to long been the only support that workers not covered by EI or related programs to fall back on. But our income support systems are actually not really designed for workers. Let’s use the right tool for the job, and a comprehensive worker support program is it.

Now if I were the government thinking of blowing up the EI system, I would also think strategically about how we can make changes to employment system that will actually make a huge difference to our tax and transfer system as well. I wrote about this here. Currently, information on tax filers and their income is only received once a year, at tax time when individuals file a self-assessed tax return for the previous calendar year by April 30. This means there is no regular reporting of information to ensure that benefits can be responsive to within year income shocks. This means all means tested benefits are delivered as refundable tax credits and not a negative income tax. Could the system be changed for more regular reporting, like monthly? Yes. Currently, most employers in Canada report aggregate information on wages, withholding, and payroll taxes to CRA regularly, yet in Australia, Ireland, and the UK, for example, employers report this information in real time to the tax authority on an individualized basis . This enables the real-time interaction of tax and benefit systems, which, in turn, ensures that income supports are modified as income changes. And that is what a negative income tax is. Canada cannot currently deliver a negative income tax and all those calling for a negative income tax type basic income are not presenting details on how this can be done. It can only be done if we change and we should change our reporting system regardless of whether a basic income is implemented or not.

How does this relate to EI? While such a system could be argued to increase the ‘red tape’ and reporting requirements of employers, you could entice employers by giving a quid pro quo of eliminating EI premiums and funding a comprehensive worker support program through other revenue tools. I’d bet that would end any grumbling employers would have.

Second, we are going back in time to dust of the early learning and childcare agreements from Paul Martin’s time in power, bringing that up to 2020, and build a Canada-wide early learning childcare system. They note clearly that the focus is on high quality and accessible ECE, learning from the mistakes of the Quebec childcare model. Yes! Let’s do it. And yes, let’s bring Alberta kicking and screaming into a world where most parents work and where education is understood to be am essential public service!

Third, we are going to create an Action Plan for Women in the Economy using an intersectional lens. OK, I am going to urge the government here is drop GBA+ and move to a intersectionality based policy analysis framework that addresses the benefits that comes from mainstreaming intersectionality. That is, stop doing GBA+ at the end of the policy process, and instead ensure our entire approach from designing our institutions, to identifying problems, to considering the trade offs among our options, from an intersectional lens. Fantastic.

Fourth, we are going to move forward on a basic income for people with disabilities. I actually have a lot to say here, but I can’t, not yet. But if the feds do this right, with a broad definition of disability as in place in B.C. (and does not use the definition of disability under the DTC or CPPC) then holy hell this is fantastic and I hope will ensure that persons with disability no longer have to rely on horrible provincial governments like the one in Alberta to ensure they are treated with respect and have the resources for social inclusion.

Fifth, near and dear to my heart, is that the government will introduce free, automatic filing for simple returns to ensure citizen receive the benefits they need. Those not knowledgeable about the tax system do not understand that only people who actually owe money to the government are required to file taxes. As I and coauthors laid out in this piece, relying on tax filing as as trigger for benefit eligibility is bad policy as it risks missing many eligible recipients. While on average, 12% of working age-adults do not file taxes, the incidence of non-filing is even higher among the most vulnerable: 97% of the homeless population do not file their taxes, 33% of social assistance recipients do not file their taxes, 40% of eligible first nations families do not receive the Canada Child Benefit because they don’t file taxes. Therefore in the in the context of benefit delivery deemed filing and auto assessment, as has been done in Estonia, Denmark, and the United Kingdom, is needed. This is a method of tax filing that transfers the onus of tax filing from the individual to the tax administrator, as well as to ensure that all citizens are auto-assessed for income support benefits. This makes me feel heard. That all my shouting on this blog and on twitter and in my research matters! Fuck yah!

And finally the SFT acknowledges that systemic racism exists. Sorry white dudes, your lived experiences do not match those we are not white. And the pandemic hit nonwhite Canadians much harder than white Canadians. See for example this Statistics Canada piece. Now what I hope is that the government see that if it moves to a real intersectionality based policy analysis framework then there is a lot more that can be done that what is outlined in the SFT. I would have liked to have seen a real commitment to UNDRIP in the SFT and that is a real lost opportunity.

So overall a lot of people in Canada are going to see hope here. And some people in Canada are going to be the usual naysayers and fretters as though none of this is important. I’ll be many of those folks are white men. Yah Dudes this is what it is like to be left out of policy making in this country. I’ll get choked up over that in about 150 years.

*This is an SFT. There is no funding committed. There are no revenue estimates. There are no details. There never are. I’ll wait for the economic update in a month or two before I get overly wound up here. I hold out hope, as I alluded to above, that we can get rid of spending that does not move us on this vision. Call me a dreamer, but I am not the only one ;-).

BCs Meek and Unambitious Economic Recovery Plan

Yesterday many waited for the BC Government’s 1:30pm PT announcement on it Economic Recovery Plan. People were more excited than usual (I mean who other than me, Kevin Milligan, and Rob Gillezeau get excited about such things) as lots of rumours are swirling about the Premier dropping the writ. And so the their Economic Recovery Plan dropped along with Backgrounders.

Now as always I was tied up in meetings and did not get a chance to take a look until this morning. I was hopeful, buoyant, upbeat, and eager to read the plan. After all, BC really led the response to the COVID-19 pandemic and did fairly broad consultations in advance of preparing this plan. And many were saying it would be their road map for their Election Platform.

For those of you not following BC politics, BC must have a general election in Fall 2021. The current BC government is a minority government, where the NDP has formed the government with the backing of the BC Greens through the CASA agreement. This government has survived since September 2017, following the demise of the BC Liberal minority government.

Election talk started to heat up back in August when MLA Tracey Redies resigned her seat, meaning a by election would have to be held by the end of February 2021. Since BC has a fixed budget date, which is the third Tuesday of every February, that meant that a by election could overlap with the budget, which is not ideal for a minority government since budgets are confidence votes.

Premier Horgan has also been polling as THE most popular premier in Canada (Premier Kenney is dead last). We are also seeing long serving an popular NDPers come out of retirement to run for riding nominations. And the snap election called by the minority PC government led by Premier Higgs in New Brunswick that resulted in a PC majority led to many speculating that Horgan might pull a similar stunt.

We also know that most of the terms with the CASA agreement with the BC Green’s were met (hello, waves, we would still like to table our BI final report) and Andrew Weaver who signed CASA but is now sitting as an independent agrees an election now is not reneging on CASA.

The BC Greens just wrapped up their leadership race which was secured by Sonia Fursteneu. Sonia has been front and centre in much of the CASA terms and comes to the party with a strong foundation in Green policies. Plus she is a real joy to work with!

So, yes, it seems possible that BCs Economic Recovery Report may form the basis of an election platform. And so Friday morning while having my coffee I began my read of it.

The first thing that jumped out at me? The Report is….short. 36 pages plus an extra 15 for backgrounders (links above). The second thing that jumps out at me? Despite the commitment from this government to do GBA+ analysis following the MSP Task Force report urging them to take GBA+ seriously, especially related to economic measures, and despite the pandemic hitting women and racialized communities harder, there is no GBA+ analysis at all. This signals to me this government does not at all take GBA+ seriously.

The third thing that jumped out at me is that there is just not a lot of detail and absolutely no analysis at all. The whole document seems rushed and poorly developed. Which as I read on page 4 may be intentional since it says “The next steps….will be included in Budget 2021.” So then, one is left asking why then did you need to come out with this report now if not about paving the way for a general election?

The fourth thing that jumps out at me like a 3D Jaws is, and this usually drives me bonkers about all election platforms and budgets, is that I don’t see a clear message. I see a lot of little things, but what I don’t see is the clarity of message. What is this all meant to achieve? What is the goal? What type of province are you building? And remember that this government has previously had clear strategies before, particularly that laid out in their Poverty Reduction Strategy. Yet I see no mention of the Poverty Reduction Strategy. What to make of that……

So my overall assessment? The BC Economic Recovery Plan is just a bunch of tired and boring measures that have been repackaged as though there is some sort of magic sauce here. Who led this creation of this document? My money is that the person shares three characteristics: male, pale, stale.

What specifics can I get behind….sort of? The biggest thing I can get behind, as it came out of my mouth, is the support for local governments for operating costs and reduce revenue. But what I don’t see is the commitment to work on a new deal for Municipalities to recognize the structural shifts impacting their fiscal future. That is, there is no vision here.

The next item I’ll give a hat tip to is expending the Early retirement bridging program in Forestry. But what I don’t see is thinking about how a more general program is needed paired with wage insurance to help other sectors transition.

It is also nice to see an acknowledgment of the gaps in digital connections, both WiFi and cellular. But WOW, the fact that there is no mention about low income and vulnerable BCers who scrambled to access these services during the pandemic when places like libraries closed and school went online is another huge missed opportunity.

The Plan will also provide a one year rebate on the PST for select machinery and equipment. Seriously? One year!? I mean look at the MSP Task Force. We recommended the PST here be dropped. The Competitiveness Commission like 10 years made a similar recommendation. 1 year *shakes head*.

There are other things, but nothing really worth mentioning. So what is my assessment? If this is the BC NDP’s election plan then they are running on polling popularity, not ideas. There are no bold ideas here…at all.

Want a basic income? Fix your system first.

During COVID-19, the Canada Emergency Response Benefit (CERB) was designed to quickly and easily reach a large segment of the Canadian population and many have called for it to be transformed into a Basic Income. Whether or not a basic income is a good idea is not the subject of this blog post and I am not going to weigh into that debate at all.

I am also not going to weigh in on what a basic income is. There are many, many models of a basic income, based on a 13 by 3 choice matrix. That means everyone using the term basic income likely means something different and they are not making clear what model they have in mind in talking about a basic income. I will, however, remind everyone that a basic income is not just another cash transfer. And anyone who thinks that that is all a basic income is has not actually read the voluminous literature on a basic income. If all you are designing just another cash transfer, stop calling it a basic income.

I am also not going to weigh into the conversation of how do you integrate, layer, or replace the current system with a basic income. This is actually something I have considered in detail. However, I know that most people have not. For example, many basic income advocates are calling for the CERB to be transformed into a basic income. Does that include how the CERB beneft was defined as income? If so, do you understand how that interacts with existing programs in unintended and perverse ways? If not, what definition of income should this new basic income benefit be? Why? And what implications does this have for the whole system? You can read my coauthored piece here on just some of the perverse implications of the CERB on social assistance beneficiaries. This is not just a technical detail to be left to the technocrats like me.

What I am going to weigh in on is that the entire tax, transfer, reporting, and income support system needs to be fundamentally changed BEFORE we even consider the merits of a basic income. Why? Two reasons.

First, administratively our entire tax, transfer, reporting, and income support system is so archaic that it layering a basic income on top of it would mean that those who need and deserve the support from a basic income the most would most likely be left out.

Second, philosophically our entire tax, transfer, reporting, and income support system is based on principles and values that are diametrically opposed to those of a basic income that layering a basic income on top of this existing system would mean that the basic income would simply replicate the fundamental problems in the current system that basic income advocates say the basic income would solve.

This is not to say there are not other issues, but rather here are two things that need to to change first and foremost. And these two things that I am going to outline are things that I have said for years now and do not represent any new critiques. Further, these two things are things that NEED to change regardless of whether a basic income, of any type, is pursued or not.

We begin by acknowledging a simple truth: In Canada, the tax system is not just used to raise revenue; it is also an important instrument for achieving various social objectives. As a result, the tax system is now closely intertwined with the income support system: many key income support benefits are either delivered through the tax system, like the Canada Child Benefit (CCB), or are dependent on information provided by the tax system, like the Guaranteed Income Supplement (GIS). Further, many are now calling for the creation of a basic income and for the tax system to be the core administrative structure for such a program. As a benefit administration tool, the tax system has advantages; however, it is also problematic for several reasons, not least because the onus to file tax is on the individual and filing is not, generally, legally required.

Applied in the context of benefit delivery, such an approach thus risks missing many eligible recipients. While on average, 12% of working age-adults do not file taxes, the incidence of non-filing is even higher among the most vulnerable. As laid out in this piece, 97% of the homeless population do not file their taxes, 33% of social assistance recipients do not file their taxes, 40% of eligible first nations families do not receive the Canada Child Benefit because they don’t file taxes. Therefore in the context of a basic income that needs a list of Canadians, needs an administrative structure including a delivery vehicle, and should there be an tax mechanism to recover the benefit, this issue with filing needs to be addressed. Can it? Yes, through deemed filing and auto assessment, as has been done in Estonia, Denmark, and the United Kingdom. This is a method of tax filing that transfers the onus of tax filing from the individual to the tax administrator, as well as to ensure that all citizens are auto-assessed for income support benefits.

Also currently, information on tax filers and their income is only received once a year, at tax time when individuals file a self-assessed tax return for the previous calendar year by April 30. This means there is no regular reporting of information to ensure that benefits can be responsive to within year income shocks. This was actually a substantial critique from Albertans who were affected by the oil price shock but whose benefits were delivered based on income reported prior to the oil price shock. This means all means tested benefits are delivered as refundable tax credits and not a negative income tax. Could the system be changed for more regular reporting, like monthly? Yes. Currently, most employers in Canada report aggregate information on wages, withholding, and payroll taxes to CRA regularly, yet in Australia, Ireland, and the UK, for example, employers report this information in real time to the tax authority on an individualized basis . This enables the real-time interaction of tax and benefit systems, which, in turn, ensures that income supports are modified as income changes. And that is what a negative income tax is. Canada cannot currently deliver a negative income tax and all those calling for a negative income tax type basic income are not presenting details on how this can be done. It can only be done if we change and we should change our reporting system regardless of whether a basic income is implemented or not.

As alluded to above, our income tax system currently relies on self-assessment., which means the onus is on the individual tax filer to provide complete and accurate information to the government on the income taxes they owe and, as a results, the benefits they are eligible for. The self-assessment process happens once a year, at ‘tax time’, when individuals must file a self-assessed tax return for the previous calendar year by April 30. This self-assessment is then verified by the tax authority using matching or third party reporting. Third-party reporting, or matching, is a tax policy concept according to which a third party (i.e., neither the individual nor the tax authority) conducts an impartial verification of income. For example, all employers are required to report to the tax authority on a T4 information slip the wage income of their employees, on or before the last day of February of the year following that to which the income information applies. Yet, in Canada not all income—notably, self-employment income—is subject to verification, meaning that such a process fails to capture a growing segment of the Canadian workforce: those employed in precarious, non-standard, and contract work. This raises concerns, not only about increased tax non-compliance, but also about a growing burden on tax filers to keep proper records and learn complex tax information. Can this be addressed? Yes! SAF-T in Europe and South America are both using blockchain to automate the current income matching process. Blockchain then allows for the matching process to be expanded to all forms of income—particularly self-employment income—, as well as payments, transfers, and even assets in a real-time environment, thereby also improving compliance and the ability to auto file and assess individuals for benefits. If blockchain is added to a system that stores information on individuals’ digital footprints then this data can be used across their life-cycle to improve tax, transfer, reporting, and benefit delivery in Canada, as is already done is Estonia. In Estonia, X-road assigns a unique digital identity to every Estonian that is used to access more than 600 government services, including voting, medical services, and tax filing. And such a system would that overcome the fact that in Canada there is no super-database of all Canadians, their bank accounts, and addresses is maintained, which if it did exist could be used to issue quick payments in times of crisis.

The list presented here is not exhaustive, but these are essential changes we must make in order to not only bring our tax, transfer, reporting, and benefit delivery system, especially in the face of the changing nature of work. In this context, digitization and the digital economy hold significant potential to revolutionize not only day-to-day tax and benefit administration, but also the provision of emergency income support during times of crisis. And these are not ‘nice to have’ changes. These are essentially modernization changes we must make to even have a chance of achieving the principles of a basic income of simplicity, respect, economic security, and social inclusion. And these ideas represent those ideas I am flushing out for a paper that I am co-authoring for the Canadian Tax Journal.

Now think about these principles of a basic income: simplicity, respect, economic security, and social inclusion. How far away from these principles is our current system? Well pretty much light years. How do we know? Well you could have spent the last two years, as I have, studying the current system in all its current detail or you can simply extrapolate this from the calls for a basic income. Why in the world would anyone think that this system could just be eliminated and these values not embedded into the basic income system? Consider, for example, the principle of respect. If the basic income is delivered to households then you will be bringing into the basic income system ‘boots under the bed audits’ simple because of the beneficiary unit. These audits are particularly targeted at women, and particularly racialized and vulnerable women. Instead, we have to first bring the current system, which is at the opposite end of the spectrum from a basic income, closer to the principles and value of a basic income so that we don’t replicate the current features of the system in a basic income design.

This just outlines real, hard, and fundamental changes we absolutely have to make to our current system, with or without a basic income. And we absolutely have to make these changes in order for us to have any hope of implementing cash transfers that are aligned with the principles of a basic income. But in doing do, we are going to run up against different values of all of us in society. Are we ready to do that? Are we ready to have that discussion? I hope so, because we need to have it in order to move forward and address the lessons we learned in this pandemic, lessons though that many of us knew needed to be learned even before the pandemic even hit.

How to understand and interpret Statistics Canada’s measurement of the poverty gap

While I haven’t seen much chatter about this, on Tuesday Sept. 8, 2020 Statistics Canada released new statistics related to Canada’s official measure of poverty, the Market-Basket Measure (MBM). This new release updates the base for MBM from 2008 to 2018 and has been long awaited by the academic community. Of course, though, these statistics sometimes become political fodder.

I noticed that Pierre Poilievre decided to make hay with the poverty gap measure.

https://platform.twitter.com/widgets.js

I can’t let this go because this tweet shows he does not have a clue as to what the poverty gap measure means and how to interpret it. Just because the gap widens actually does not mean poverty worsened. Come along for a basic arithmetic ride!

The MBM threshold is the disposable income below which someone would be considered living in poverty. The gap, or the depths of poverty, is defined as the gap between the MBM income thresholds and the average income of those whose income is below the MBM.

Technically referred to as the “average gap ratio”, it is expressed as a percentage of the MBM income threshold. For example, a family of four living in Vancouver with an income of $30,000 and an MBM income threshold of $40,644 (that is what it was under the 2008 base) would have a gap ratio of 26.2%. The average gap ratio for a given population (e.g. all families of four) is the average of these values as calculated for each family.

Examining depths of poverty over time is potentially problematic as interpretation of the movement over time is difficult. Consider this example: suppose there are only two families. Family A has an income of $19,000/year and family B has an income of $15,000/year. Otherwise, both families are exactly the same. Suppose as well that the poverty line is $20,000. Given these incomes, the average gap ratio is 15%. Suppose that due to some policy change, both families receive an extra $1,000 of income. Family A is moved out of poverty to an income of $20,000 and family B remains in poverty with an income of $16,000. After this policy change, the average gap ratio is 20%—the average gap ratio has gotten worse however both families have a higher income. Thus, as the average poverty gap increases, it is possible that all families are better off. This occurs because as there is an improvement in poverty reduction, i.e. there are fewer families with income below the income threshold, the number of persons/families over which the average gap ratio is measured decreases.

Regardless of this shortcoming, the average gap ratio is useful in assessing how much resources are needed at a point in time to eradicate poverty through a perfectly targeted cash transfer. For example, an average gap ratio of 15% means that a perfectly targeted cash transfer that is 15% of the poverty line is needed to eradicate poverty. This provides intuition on the magnitude of the average gap ratio and intensity of poverty.

Additionally, this shortcoming has implication for governments as they work towards their defined poverty reduction targets: there is a trade off between an improved poverty rate and an improved average gap ratio. On the one hand, the government could focus on moving those persons/families just below the poverty line to the poverty line (or above). This would decrease the poverty rate but could potentially increase the average gap ratio. On the other hand, focusing on those persons/families in the greatest depths of poverty and helping them move closer or above the poverty line would decrease the average gap ratio but may have less of an impact on the poverty rate and would potentially be more costly.

Either way, comparing gap numbers over time as Pierre has done is just not an appropriate use of the gap measure. And by inappropriately using the measure, he also came to an incorrect conclusion. That is politics for you, I suppose. All bluster, no fact.

What the heck is tax withholding and why does it matter for whether maternity and parental benefits are ‘tax free’?

As you all may know, I recently wrote about the Conservative Party of Canada’s claim that they were making maternity and parental benefits (why for the love of all that is taxes, can’t they bring themselves to say parental benefits) tax free.

In a nutshell, no they are not making maternity and parental benefits tax free. They are simply created a nonrefundable tax credit that won’t be applied to the income until tax time. The credit will be paid out at 15% whereas someone women will, gasp, actually be paying a higher tax rate on the maternity and parental benefit income. In addition, we already have numerous tax credits in place that already make this income tax free or nearly tax free for others. Whether or not you, the beneficiary, actually derive any benefit from this tax credit depends on a host of complex factors, but overall to claim it is tax free when it is not tax free for everyone is just not factual.

The CPC has since made two claims related to my critiques. First, the nonrefundable tax credit will be allowed to be carried forward so that if you are unable to get the whole benefit in any tax year, you can try again in another. Great. It is unusual to treat nonrefundable tax credits in this way, but not unheard of. After all the tuition tax credit  has the same feature (but the tuition tax credit can also be transferred, and I don’t hear anything about a similar feature (yet) for the maternity and parental benefit tax credit). This stranded tax credit being allowed to be carried forward means lower income parents may eventually derive benefit from the tax credit, albeit not in the year in which they are actually, you know, on leave caring for an infant.

Does this change now mean their claim of making maternity and parental benefits tax free true? No, because it still ignores the complexity of a progressive income tax system and marginal tax rates.

My second critique has been that the existence of the nonrefundable tax credit does not change the fact that under the Income Tax Act, income from maternity and parental benefits are subject to withholding, meaning that when the benefits are paid, the payer (Services Canada) but, by law, withhold taxes on the income benefit. Withholding is set out in section 153 of the Income Tax Act.

This section requires anyone who pays the outlined forms of income must “deduct or withhold from the payment the amount determined in accordance with prescribed rules and shall, at the prescribed time, remit that amount to the Receiver General on account of the payee’s tax for the year under this Part or Part XI.3, as the case may be, and, where at that prescribed time the person is a prescribed person, the remittance shall be made to the account of the Receiver General at a designated financial institution.”

This means even with the nonrefundable tax credit in place, parents will still only receive the net of tax withholding amount at the time the benefits are paid. If the Conservative Party of Canada wants to exempt maternity and parental benefits from withholding they can’t just say “Hey CRA, don’t withhold taxes.” They have to actually change the Income Tax Act and any associated regulations, legislation, and prescriptions to make it so. They will have to be sure that they make these changes to apply only to maternity and parental benefits, increasing a host of implementation complexities. After all, you can in fact get both other EI benefits in the year you also get EI maternity and parental benefits. This what is behind my statements that in order for taxes not to be withheld, they need to modify the TD1 form.

And, just to be clear, for parent’s whose marginal tax rate on the benefit income is above 15% THEY WILL STILL OWE TAXES AT TAX TIME ACCORDING TO THE DIFFERENCE BETWEEN THE 15% CREDIT AND THEIR ACTUAL MARGINAL TAX RATE. While everyone wants to say well, wah, they are higher income people, they can afford it. I want to remind everyone that when it comes to an unexpected income tax liability when you are on reduced income and juggling a young family, that liability will come as a shock, especially since you were told by the party that brought in this regime that the income was supposed to be tax free.

It is simple. Don’t say you are giving maternity and parental benefits tax free status when you are not. The CPC are not doing this. They are creating a nonrefundable tax credit. Full stop. I am not saying anything about whether this policy is good or bad. What I am saying is their communication is not factual and is not consistent with the Income Tax Act. And any of their tweaks over the last few days does not change this.

 

No, the Conservative Party of Canada are not making maternity and parental benefits ‘tax free’

On August 20, 2019, the Conservative Party of Canada (CPC) announced that they will “make maternity benefits tax free.” I have so much to say here.

For starters, while all the communications from the CPC and Andrew Scheer focus solely on the word ‘maternity’, the proposal actually applies to both maternity and parental benefits. Maternity leave is a 15 week leave that only the birth parent can take and it is a period of time allotted solely for the birth parent to recover from the trauma of birth. Parental leave is a 35 week leave (or 78 week leave if you opt in for the extended benefits) that either parent can take to allow them time to care for and bond with their new child (whether the child be physically birthed by one of the parents or adopted). It is perplexing to me why they would only use the word ‘maternity’ in their highlights, but I expect that has something to do with political spin, something that is lost on me.

More importantly though, I am sorry to say the CPC are not making these benefits ‘tax free’. If we look in the Oxford dictionary tax free is defined as ‘exempt from tax.’ That is, people reading this statement will think, and rightfully, that the income will be free from tax, not taxed, that they don’t have to pay tax on the income received from maternity and parental benefits. That, my friends, is not the case. What they are offering is a 15% nonrefundable tax credit. Anyone saying that a nonrefundable tax credit is the same as something being tax free knows very little about the tax system.

Let’s look at this. First of all, benefits paid out under the EI system, including maternity and parental benefits, are taxable income. Premiums paid into the EI system are paid out of your pre-tax employment income. Benefits then paid out of these contributions are then taxable. That makes sense. Income should only be taxed once (in theory, yes there are examples where it is taxed more than once and there are examples where income is never taxed) so you don’t pay tax on the contributions to EI, instead you pay tax on the income stream derived from these contributions, the income you get when you make an EI claim.

Second, in order to qualify for maternity and parental benefits you must have had 600 hours of insurable employment in the period before the start date of the benefit period. You have to had worked and earned employment income from that work. That is, you must have earned income before the benefits are paid. The maternity and parental benefits are paid after that qualifying income is earned, meaning the applicant parent will owe their marginal tax rate on these benefits. That marginal tax rate will depend on their income earned in the period before they take maternity and parental leave which will also depend on what month the child is born.

Third, when you receive your maternity and parental leave benefits, tax is withheld (this is called withholding) on that income. You only receive the after tax amount. But our tax system does not work well for people with multiple sources of taxable income. The withholding on each source of income only factors in that source of income into withholding. The end result is most people with multiple sources of income do not have enough income withheld on their earnings and they owe money when they file their tax system. This is true for maternity and parental benefits. The amount withheld assumes that this income is the only income you have earned, ignoring the actual marginal tax rate that you will owe on these benefits. This is why most people who receive maternity and parental benefits tend to owe money when they go to file their taxes. Sadly, because few people understand the system, they are mostly quite shocked and annoyed by this.

Fourth, unless the CPC modifies the TD1 form to allow for their proposed nonrefundable credit to be applied directly to maternity and parental leave benefits then what is outlined in the previous paragraph would still hold if this credit comes to fruition. That is, anyone receiving maternity and parental benefits will still have taxes withheld from their weekly benefit payment and will not be able to able to apply to have this nonrefundable credit applied until tax time.

Fifth, not many people understand how nonrefundable tax credits work. Just because you claim it does not mean you get any benefit from it. The way it works is first you determine your taxable income which is on line 260 of the income tax form. Taxable income is your total income less deductions (like RRSP contributions, union dues, child care expense deduction, capital losses, norther residents deduction, etc.). This is the income to which the federal and provincial statutory tax rates are applied. As noted on this site, the federal statutory tax rates are as follows:

Capture

So on the first $47,630 of income you pay 15%, income over that but under $95,259 is taxed at a higher rate of 20.5%, and so on. So if you earn $55,000 in annual income, your tax owing before credits are applied is 47630*0.15+(55000-47630)*0.205=$8,655.35. It is now that nonrefundable tax credits are then subtracted from the tax owing. They are applied in a particular order and the total of the nonrefundable tax credits cannot exceed the amount of tax owing, $8,655.35. That is the total amount of non-refundable tax credits can only reduce the amount of taxed owed to $0, any amount that remains is forfeited. Nonrefundable tax credits are almost always calculated at the lowest statutory tax rate of 15%. For example, there is the basic personal amount of $12,069. To determine the amount of this tax credit you multiply that amount by 15%=$1,810.35 and then subtract that amount from tax owing: $8,655.35-$1,810.35=$6,845. Now you only owe $6,845 in taxes!

OK, now that we have the basics of the system down, let start by looking at two otherwise identical people who claim EI maternity and parental benefits, but will owe a different amount of taxes on their benefits and see how this credit works. We will just work at the federal level here since that is what matters for the proposed credit. It is through this example that we will see more clearly how tax credits may not actually benefit you, despite you thinking they do.

Janice was working full time before she took her maternity and parental leave. She took her leave starting in July 1 and took the full amount of regular combined benefits. Before she took her leave she had already earned $55,000 and qualified for the maximum benefit payment of $562 a week, receiving then $14,612 in gross benefits (accounting for the one week waiting period) in the birth year and $12,926 in the subsequent year.

What tax does she owe on this income before credits are applied? 47630*0.15+(50000-47630)*0.205=$8,655.35 on her employment income (an amount reduced once she claims the personal exemption on the first $12,069 of this income, the tax credit for her EI and CPP contributions, and any other credits that she may qualify for) and, gasp, $14,612*0.205=$2,995.46 on the maternity and parental benefits she received. Notice she will have to pay the 20.5% tax rate on her maternity and parental benefits…wait, you say. Right here, right here exactly is where you should be able to see a punchline about the proposed tax credit.

She will owe $2,995.46 in tax on the benefits, but only get $14,612*0.15=$2,191.8 in offsetting tax credit AT TAX TIME on that income, for a net tax owing on her parental benefits of $803.66. But remember, when she received her benefits, the government already withheld taxes on the income, withheld at 15% so she only gets the benefit of the credit calculation in March or April when she files her taxes and will be shocked to see she still owes taxes on that income. Hmmmmm, that does not exactly sound tax free?

Now in the next year, however, things change. She earns $12,926 in parental benefits which she receives from January to June. She will then pay $12,926*0.15=$1,938.9. That seems to match up with the offsetting tax credit now, does it not? What if in June Janice decides not to return to work? In this case her total earnings for the year are $12,926. She owes $12,926*0.15=$1,938.9 in taxes before credits are applied. But because this is her only income, the personal exemption applies as well as the proposed tax credit. Her tax credits amount to $1,810.35 from the personal exemption, reducing her tax liability to $128.55. The tax credit from the proposed tax credit is $13,488*0.15=$2,032, but because the credit is not refundable she only gets $128.55 in additional benefit from this new proposed tax credit, not the full amount as advertised. That is, she derives most of her benefit from existing tax credit.  And this is rub with the tax credit for anyone with a low income. Most of the credit forfeited because the credit is non-refundable.

Let’s take instead Piper. Piper was also working full time in a government job before she took her maternity and parental leave. She took her leave starting in January 1 and took the full amount of regular combined benefits. Piper too qualifies for the maximum benefit payment of $562 a week, but because she timed her birth for the new year (her and her partner are really hoping that the child will become a professional hockey player) she has no employment income in her birth year, just maternity and parental benefits. She collects $27,538 in parental benefits, on which tax were fully withheld. Again, here her tax owing is $27,538*0.15=$4,130.7. Wait, you think, we now the proposed credit seems to work well. Except again, don’t forget that first we get the personal exemption of $1,810.35 for tax owing now of $2,320.35 to which the proposed tax credit is applied. The proposed tax credit is $27,538*0.15=$4,130.7. Again, her tax liability is reduced to $0 but she has $1,810.35 in forfeited tax credits from the proposed tax credit.

If we compare their various situations, we see that they differentially ‘benefit’ from this tax credit despite being otherwise identical. Both earned $27,538 in maternity and parental benefits. Janice ended up paying $803.66 in taxes on this income, whereas Piper paid no tax on this income. Janice forfeited $1,903.45 in value from the tax credit and Piper forfeited $1,810.35 in value from the tax credit. Two identical women differentially benefit because of how their births were timed. And this also shows how marginal tax rates matter for the application of the proposed tax credit.

You can do a whole host of different calculations and see who: (1) obtains absolutely no benefit from this proposed tax credit because existing tax credits already reduce their tax liability to zero; (2) who derives only a partial benefit from the proposed tax credit; and (3) who derives a full benefit from the proposed tax credit. The thing is not only does your income matter, so too does the timing of the birth. Births are not just randomly allocated. There is a pattern to births in Canada, called birth seasonality. This seasonality of birth in Canada sees more children born in the late summer and fall months, meaning more woman are like Janice, fewer women are like Piper. This pattern I’ve also shown is highly influenced by public policy. If this credit were to come to fruition, we might expect to see women changing their birth seasonality. There are costs and benefits to doing so.

But bottom line, the CPC’s advertising this scheme as making maternity and parental benefits tax free is not factual at all. And the other part they did not tell you is that for many women on maternity and parental leave, they already derive most of their tax benefits from existing tax credits and little from this new proposed credit.

UPDATE: The CPC have just uploaded a new backgrounder on their website here: https://cpcassets.conservative.ca/wp-content/uploads/2019/09/12094250/4d940e964f7d315.pdf

In what appears to be a direct response to my points above, albeit with no citation (said face), they are now saying that the stranded tax credit that I mention above for both Janice and Piper’s case, wait forward, will be allowed to be carry forward. That, to me, is new and was not there in the past. And sorry folks, but the only person who talked about public policy implications and month of birth is typing this right now.

That sort of gets at some of the criticism of the policy. It does not address the fact that someone like Janice has a higher tax liability on the income than 15% so will still owe money. It does not address the fact that those parents that self finance their leaves receive no benefit from this policy. And given that the carry forward provision is unusual for tax credits (tuition comes to mind) and requires you to have future income seems ancillary to support women make the choice that is best for them, including to, you know, stay home if they want. And, ironically, the fact that they had to make the carry forward provision actually reinforces the point that the income is not, you know, tax free. 

And for all that this means, why not just make the tax credit refundable so parents get the benefits earlier in the child’s life and while on a reduced income?

 

 

 

 

 

 

Conservative Party of Canada Conspiracy Theories: Statistics Canada Edition

Over the last few days, members of the Conservative Party of Canada (CPC) have floated what amounts to glorified conspiracy theories of the dreaded federal Liberals controlling Statistics Canada. It is important to remember that Statistics Canada is an arm’s length body that, under the Fundamental Principles of Official Statistics, must remain strictly neutral with regard to political matters. In particular, Statistics Canada’s operations are to be kept free of intervention from the political side of government and must be fully free to compile and publish statistics.

The first event occurred on Monday when the CPC Twitter account tweeted this doozy:

What is not true? All of it. What is true? Statistics Canada, under its own mandate with no meddling or direction from the Liberals, the Minister, or otherwise, had been working on a pilot, with the knowledge (though apparently not full) of the Privacy Commissioner, to collect better data to improve its statistics on spending and debt by obtaining the personal banking information of 500,000 Canadian households directly from the banks. The pilot was designed because Statistics Canada’s usual methods of obtaining information to develop its statistics are no longer yielding the rich and detailed data it needs, you know, to develop official statistics.

Was any data provided by the banks? No. The banks took their concerns to the Privacy Commissioner and the Privacy Commission paused the pilot in its tracks until the privacy concerns raised by the banks were addressed. This was also reported on by the media as well.

There was information provided to Statistics Canada by the credit agencies, information that was released under the permissible purposes rules of access to individuals credit reports. (Financial institutions, other lenders, and companies with what’s called “permissible purpose” can access a copy of your credit report in order to make certain types of decisions about you.) If you, like me, access your free credit report every year, you will see them listed on your report. I can say that my credit report shows that my credit information was given to Statistics Canada. I was more than pleased to be included in their sample because when it comes to data privacy, Statistics Canada has my full trust. The other companies listed as accessing my information under the permissible purpose rules do not.

Was the Minister of Industry, Minister Bains, involved? No. Was Cabinet involved? No. Was it at the expense of Canadians? No, it is for their benefit that we have accurate official statistics as they are used for policy design and implementation.

So there is literally nothing true in the CPC tweet.

The second conspiracy event came about on Wednesday when Lisa Raitt tweeted this:

Did the Liberals lowball costs like rent to move the poverty line lower? No. The Liberals did not. Did Statistics Canada on their own develop the measure and definition for the MBM? Yes. So let’s get into the history here, because it matters.

The ‘best’ measure we have a poverty right now is the Market-based Measure (MBM). The market-basket measure of poverty began to be developed in the early 2000’s due to concerns with the two existing measure of poverty: the Low income measure and the low income cutt off. The MBM, developed by Employment and Social Development Canada (ESDC), attempts to measure a standard of living that is a compromise between LIM/LICO, a compromise between subsistence/social inclusion. Here is a quote from Miles Corak’s piece:

The poverty rate derived from the Low Income Measure is the fraction of the population with an income lower than one-half of the median income in that year. If an individual has an annual income (appropriately adjusted for family size) that is less than half as much as someone half way in the income distribution, then that individual is considered to be in low income….

The Low Income Cut-off is a bit more complicated. It is different both in nature, and more crucially in the way it is updated. In this case the poverty line is tied to the proportion of income the average household spends on food, shelter and clothing. Like the Low Income Measure, it is adjusted annually for changes in inflation, but it has been updated only four times in a more fundamental way to reflect changes in family spending patterns.

These two measures though produce very different stories about poverty:

Capture

As described by Miles:

The patterns in the two statistics can be understood in this way. The median income for an individual was relatively constant from the mid 1970s up to the mid 1990s. In essence the threshold associated with the Low Income Measure did not change that much, and was in the range of the Low Income Cut-Offs, which in turn was anchored at its 1992 base. So the two poverty rates moved together, but the Low Income Measure being less cyclically sensitive because the poverty threshold falls as median incomes fall during recessions.

After about 1996 the two poverty rates diverge because, on the one hand, the poverty line derived from Low Income Cut-Off stays fixed, but that derived from the Low Income Measure rises in step with the annual increases of the median income that started at this time, and more or less continued through to 2014.

Here is what Miles writes further in the piece about these two measures:

If you have a tendency to see poverty as being subsistence, tied to basic needs, and absolute or fixed in nature, then you will be inclined to believe that poverty has fallen, and that there really is not much need for public policy to do more. Though it still has to be explained why your notion of subsistence is tied to spending patterns of the average household in 1992. Why not 1986, 1969, or even 1959?

If you have a tendency to see poverty as an aspect of inequality in the lower part of the income distribution, tied to a continually evolving median income and relative or moving in nature, then you will be inclined to believe that there has been no progress in the battle against poverty, and a government strategy is desperately needed. Though it still has to be explained why your notion of relativities should be adjusted so regularly, and even during recessions when the income of the median household might also fall.

Both of these perspectives are based upon extreme judgements of what it takes to participate normally in society—something never changing, something always changing—and for this reason I would suggest that they are both wrong, have misled our understanding of how Canadians have lived their lives, and are likely to lend confusion to public policy discussion on the need for and design of a national poverty reduction strategy.

So if the LIM and LICO are so poor at measuring what we really want to know, what do we do. We create a new measure called the market-basket measure. The MBM involves costing out a basket of goods and services associated with a modest standard of consumption. The MBM then more closely reflect what those with lived experiences of poverty describe. The MBM was designed in close discussions with experts in the area, and experts are closely involved with updates to the MBM. The MBM was also chosen by the current Government to set legislative targets related to poverty reduction because of the expert advice they got not only from experts but also those with lived experiences in poverty.

And here is the previous graph reproduced with the MBM added. Here you see the MBM appears to be a compromise between the LIM and the LICO, as it was intended.

Capture

Is the MBM perfect. No. Notice above that the word modest is bolded. What does it mean to have a modest standard of living? Statistics Canada does not define their modest standard of consumption based on Government direction. In fact, if it did, we could argue the CPCs were the ones who directed that since the MBM was first publicly released for the year 2006 Instead, this requires that expert Statistical agency choosing items in the basket that accord with that definition.

Well, in one category that Ms. Raitt focused on was housing.  Here the MBM uses a measure not everyone agrees with. Michael Bliss wrote this well circulated piece at the time last year about this topic. You will notice that other categories of costs are discussed, but with respect to housing, is the median rental price of a one bedroom posted on the chosen website by Bliss a modest standard of consumption? That we can discuss and, in fact, are discussing. Statistics Canada is just finishing off a comprehensive review of the MBM measure of poverty and all the details can be found here. It is not the first review of the MBM and it won’t be the last.

So now I have to ask, what measure of poverty would Lisa Raitt then suggest?

Ah I see, it would seem she wants the poverty line to be higher so that would be the LIM. Interestingly enough, when the CPCs talk about their own progress on poverty they do not use the LIM. If they did, you can see from the above, under the Harper Conservatives little to no progress on poverty was made. Actually, when talking about their own record on poverty, they use the LICO. Under the LICO, poverty was reduced from 11.5 to 9.2 under the CPC, compared to 13.4 vs 14.2 using the LIM.

But when it comes to looking at results regarding poverty in Canada since the Liberals took over, the trend is quite clear regardless of the measure used, poverty has been reduced regardless of which measure you pick.

LIM-AT LICO-AT MBM
2015 14.2 9.2 12.1
2016 13 8.1 10.6
2017 12.7 7.8 9.5

Poverty  in Canada is a serious matter. We need to do more for people to help them escape poverty. This should be a matter all parties agree on, but they don’t. Poverty has devastating affects on people and their children and it impedes our economic progress.

Further, the reputation of Statistics Canada as the best statistical agency in the world is at risk when politicians pretend that it faces interference by politicians. Stop it, stop using our expert statisticians and producer of our official statistics for your political fodder. After all, we would not want people to think we are, say, like China with regards to suspect official statistics.