The gradualist approach towards an unconditional basic income for all involves the introduction or extension of universal benefits in place of current income-tested ones. Such a policy shift might cause higher fiscal costs or adverse distributional effects, at least in the short run. However, this need not always be the case. Using the tax-benefit model EUROMOD, the article simulates the introduction of a universal housing transfer – that is flat rate, tenure neutral and budget neutral – in place of mortgage interest tax relief and housing benefits in the Netherlands and Sweden. As it turns out, the regressive effect of mortgage interest tax relief thwarts the progressive effect of housing benefits. In view of that, replacing both by the universal housing transfer (equivalent to a partial basic income for housing) would enhance tax progressivity and reduce income inequality at no extra fiscal cost. Policy implications and possible objections are discussed in the concluding section.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
