Richard Bird - Institute for Public Economics - University of Alberta

alleviation, Canadians indeed appear to want targeting, at least in the senseof ensuring minimal inclusion in the welfare system of those who should not bethere. For other important redistributive programs, however, such as thoserelated to children, the elderly, and the health sector, it is much less clear thateven the best targeting system -- indeed, perhaps especially the best targetingsystem -- will survive the ultimate test of political acceptability.This question has become more important now that we have the ability toadminister targeted benefits fairly effectively through impersonal, and largelyinvisible,accountingsystems. 51 The visiblestigmaof singlingout the poor as"second-class" citizens has lost most of its force, as indeed demonstrated bythe general public acceptance to date of such income-conditioned targeting asthe Child Tax Benefit and the Seniors Benefit. Nonetheless, furtherdevelopment of such narrowly targeted social policy reforms may prove neitherpopular nor even feasible unless the majority who now benefit from universalprograms are also given some immediate and visible benefits such as tax relieffor the private provision of equivalent services.To the extent social policy becomes more effective in targeting benefits to thepoor, rather than making them universally available to all, some compensatingoffset to middle-class losers may thus be required to ensure continued politicalsupport for the whole social policy package. One way to achieve this aim maybe by providing increased tax relief for what the Carter Commission called"non-discretionary expenditures" 52 -- particularly those related to suchprominent social policy objectives as child welfare, education, and health.Unless this is done, the tax-transfer system may come increasingly to beperceived as unfair in the sense that non-low-income individuals who incurspecial living costs -- for example, owing to physical disability or supporting fourchildren -- are worse off than those with similar incomes who do not incur these51Two examples may be offered: First, complementing the universalpension system (OAS) described in note 37, Canada has a supplementaryGuaranteed Income System (GIS) -- in effect a "negative income tax" for theelderly which insures (in 1996) a minimum annual income of $11,280 for asingle person over 65 and $14,688 for a couple both over 65. The GIS is paidout monthly with the OAS payment, with the amount paid being based entirelyon information in the previous year's income tax return: about 40 percent ofpensioners get such supplementary payments. Second, several systems havebeen suggested that could identify who is eligible for how much subsidy onwhat without the "stigma" problem: see the early discussion in Marjorie Wilcoxand Selma J. Mushkin, "Public Pricing and Family Income: Problems ofEligibility Standards," in Selma J. Mushkin, ed., Public Prices for PublicProducts (Washington: The Urban Institute, 1972), p. 395, and the earlierdiscussion of pricing health policies at note 38. The increasing use of "smartcards" would appear to make such systems increasingly workable.52See Royal Commission on Taxation, Report (Ottawa: Queen's Printer,1966), vol. 1.19