How a guaranteed income could work

Policy Options

Recently there has been a resurgence of interest in Canada in the idea of a guaranteed or basic income. The essential idea is that everyone would be entitled to some minimum income, provided by regular payments from the government. As individuals’ incomes from other sources increased, whether wages and salaries from paid work, interest and dividends on investments, or income from social insurance programs like employment insurance, the regular guaranteed income payments would phase out (be “taxed back”), and at some point this other income would be taxed under the income tax system, as at present.

The idea of a guaranteed income as a right of citizenship or residence in a country has been waxing and waning in public discussions for decades ─ in the 1960s in the US with its War on Poverty, and in the 1970s in Canada, with the Social Security Review and Mincome experiment. The idea is rather unique as a policy option, in that it has strong adherents across the political spectrum. They are nevertheless motivated by a variety of goals, ranging from reducing poverty and increasing income edistribution, providing an economic cushion for technological unemployment, and reducing the costs and bureaucracy of administering the modern welfare state’s many programs.

Unfortunately, however, these discussions are far too often characterized by vagueness and imprecision regarding the particulars of the guaranteed or basic income proposed. Proponents and opponents often talk past each other, because they have different but unshared notions of just what a guaranteed income would be.

As a result, there are two main questions that need to be addressed: can Canada afford a basic income, and how should it relate to the income tax system?

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