Can Self-Financing Redeem the Basic Income Guarantee? Disincentives, Efficiency Costs, Tax Burdens, and Attitudes: A Rejoinder

Abstract

We respond to concerns raised by Kesselman (2018) about our illustrative proposal on how to finance and implement a basic income guarantee (BIG) in Canada (Boadway, Cuff, and Koebel forthcoming). We demonstrate how our proposal could be adjusted to mitigate Kesselman’s main concern of high marginal effective tax rates (METRs) and argue that the incentive effects, redistribution consequences, and public opposition are not as detrimental as Kesselman suggests. We also show that Kesselman’s proposed alternate—an expanded Working Income Tax Benefit—could be incorporated into our BIG but would result in higher METRs and efficiency losses at some incomes.