Toward a National Universal Guaranteed Basic Income

There is renewed discussion of a basic or guaranteed income at both the federal and the provincial levels in Canada, but counterarguments about the cost, work disincentives, and electoral appeal of such schemes remain challenging. In this article, we argue that a grand plan for a basic or guaranteed income is unnecessary because self-financing redesign of existing tax credits to be refundable can better target benefits to low-income families while improving tax equity. Using 2015 tax and transfer parameters and estimates of income and population, we assess the federal transfer system as a source of universal income security, identify the revenues that can be raised through the elimination of selected federal tax credits, present four options that could be financed within that budget constraint, assess their performance, and select our preferred universal basic guaranteed income (UGBI) option. We then provide a more detailed assessment of the impact of our preferred UGBI design and discuss the extension of that design to provincial tax and transfer systems. We estimate that the combined federal and provincial UGBI that we propose would effectively target benefits to low-income households and virtually eliminate poverty for all but single non-elderly individuals at a modest efficiency cost in terms of work disincentives.