Universal Basic Income Could Cost Between $132B and $464B Annually, Report Finds

September 17, 2020 Updated: September 17, 2020

Adopting a universal guaranteed basic income program in Canada could cost taxpayers between $131.9 billion and $464.5 billion per year, concludes a new report released today by the Fraser Institute.

The study comes as anticipation builds ahead of the throne speech on Sept. 23, which is rumoured will outline a major ramp-up in government spending on several initiatives including a larger social safety net—potentially including a guaranteed basic income.

Calls for a universal basic income scheme have grown louder as advocates say it’s a more permanent solution to the Canada Emergency Response Benefit (CERB) and could replace other social assistance programs amid the ongoing economic crisis posed by the pandemic. Implementing a universal basic income would mean that every Canadian, regardless of whether or not they have a job, would receive enough money to cover the basic cost of living.

The Fraser Institute report, titled GAI: How Much Could A Guaranteed Annual Income Cost? (pdf), outlines the potential costs of four different basic income programs including different options for reducing program costs by “phasing out” the benefit as an individual’s income rises.

For example, if the federal government extended the Old Age Security benefit to all Canadians between the ages of 18 and 64—providing $7,272 a year in minimum income—it would cost $131.9 billion per year, the report notes.

However, if the federal government based the basic income on CERB, providing a monthly benefit of $2,000 to all eligible Canadians, the annual program cost would be $464.5 billion per year—more than doubling all current federal government program spending.

When CERB was first launched in April, Statistics Canada reported that nearly 6.7 million Canadians had applied. That number has slowly declined as businesses have been reopening.

A separate report also released by the Fraser Institute today, GAI: Illustrating the Tax Implications of a Guaranteed Annual Income (pdf), looks at how much tax would be required to pay for the various basic income schemes explained above.

It finds that the federal Goods and Services Tax (GST) would have to increase from the current five percent to between 26.25 and 105.35 percent to pay for a universal basic income.

“In order for Canadians to consider this type of new government program, it’s important for them to understand the true costs and tax implications,” said Tegan Hill, author of the tax report.

The report also calculated how much of the GAI programs could be financed by taxing top earners more—specifically those earning more than $250,000 annually. It found if all the disposable income of those earning more than $250,000 were taxes, it would cover 25 to 87 percent of the total cost of a GAI, depending on the scale of the program.

Researchers from the University of British Columbia looking into the merits of a universal basic income found that the federal government would have to figure out complex details before they could move forward with a program. They include considering whether payments will be made out to individuals or families, when they would be given out, how they would be taxed, and how the existing tax system would have to adapt to finance the program.

“Taking a basic income seriously as an option means having an evidence-based discourse about how one would both design and implement it,” concluded the study.

“Simple claims about the simplicity of a basic income on one side and simplistic characterizations of what proponents of a basic income are setting out on the other side do not move us toward the goal of building on what has been both revealed and achieved in this crisis to create a more just society.”

With files from The Canadian Press