OTTAWA – So-called guaranteed minimum income programs, which are meant to help people escape poverty, could inadvertently have the opposite effect — or require large tax increases in order to be effective, a new report says.
A guaranteed minimum income often means different things to different people, but at its core it can be described as a no-strings-attached benefit that governments can provide to their citizens instead of various targeted social benefits.
But such a program isn’t the magic bullet some would like it to be when it comes to eliminating poverty, says the paper, released Wednesday by the left-wing Canadian Centre for Policy Alternatives think tank.
Using such a measure to eliminate poverty in Canada could cost anywhere from $49 billion to $177 billion a year in new spending, depending on how much gets clawed back, requiring double-digit tax increases to cover the cost.
Cancelling existing programs and redirecting the money to a minimum income program would be problematic on two fronts, says the report: A universal payment might take needed funds from poorer Canadians, increasing poverty rates across the country, while a more targeted, income-tested benefit could lead to higher levels of poverty among seniors, it warns.
Either way, governments are left with politically problematic paths, said David Macdonald, a senior economist with the think tank and the author of the study.
“If you want to start cancelling programs — existing programs — to pay for a basic income, then you automatically create winners and losers,” Macdonald said.
Instead, the paper argues for a taxable, universal benefit sent to all Canadians on top of the 33 federal and provincial income support programs, such as the Canada Child Benefit and old age security. Such a benefit would lift some 713,000 Canadians out of poverty at a net cost of $29.2 billion, it says — a calculation that doesn’t include social assistance programs such as employment insurance.
Multiple studies have long argued the pros and cons of an idea some see as a poverty panacea. Outside Canada, the concept has been implemented in several countries; a number of provinces are studying the idea, while Ontario has plans to launch a pilot project.
Macdonald said governments don’t need to take years to study how a minimum income affects poverty rates.
“It doesn’t require a 10-year pilot project to figure out what the impact and cost will be on poverty,” he said.
“You get additional information on health care and education…but a guaranteed income at the levels I’m talking about in the paper, which are reasonably expensive, really are not for the middle class. This is definitely for people at or below the poverty line.”