Negative Income Tax

4 Key excerpts on "Negative Income Tax"

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  eBook - PDF

  Basic Income

  A Radical Proposal for a Free Society and a Sane Economy

  • Philippe Van Parijs, Yannick Vanderborght(Authors)
  • 2017(Publication Date)
  • Harvard University Press

    (Publisher)

  In this respect, some negative-income-tax advocates believe that their scheme can improve on current welfare arrangements. 19 But because of the need to switch back and forth between different administrative statuses of claimant or worker, a negative-income-tax scheme presents the same intrinsic defect as standard means-tested schemes. Only the upfront payment associated with a basic income can get rid of it altogether. 20 Consequently, even when it operates at an individual level and corresponds on paper to an identical net income profile, a negative-income-tax scheme is by no means equivalent to the closest possible basic-income scheme and does not present the same advantages as regards both poverty and unemployment. The basic reason, stressed by philosopher Michel Foucault in his discussion of the Negative Income Tax (to which we will return in chapter 4), is that it remains a policy targeting the poor. The welfare states that developed in Eu-rope since the end of the nineteenth century all “wanted to ensure that eco-nomic interventions were such that the population was not divided between the poor and the less poor.” By contrast, according to Foucault, the Negative Income Tax, like the Poor Laws of another age, “distinguishes between the poor and those who are not poor, between those who are receiving assistance and those who are not.” 21 What our societies need for the sake of freeing everyone from poverty and unemployment, and what those committed to BASIC INCOME AND ITS COUSINS 39 freedom for all should fight for, is a floor on which all can stand, not just another, more sophisticated policy targeted at the poor. While this principled superiority of a universal basic income should be clear, it is true that how much difference it makes is partly a matter of eco-nomic and administrative circumstances. To start with, the upfront payment of the basic income could be made the default option rather than compulsory for all.

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  eBook - ePub

  The Rich, The Poor, And The Taxes They Pay

  • Joseph A. Pechman(Author)
  • 2019(Publication Date)
  • Routledge

    (Publisher)

  Whether assistance in kind should be abolished once cash assistance is increased in amount and in coverage is more doubtful. In general, we suggest that if public housing, the food stamp programme and medical programmes for the poor are to be continued, they should be justified, and modified, by considerations other than income maintenance. For example, under an adequate Negative Income Tax the means test presently used in the determination of eligibility for public housing could be eliminated, and rent subsidies eventually could be eliminated. Eligibility for housing built under government programmes would not depend on income levels. Public funds might still be made available by the government at rates below the market rate of interest, but these loans would be related to urban renewal programmes and to the elimination of discrimination in the housing market—and not to considerations of income maintenance. On the other hand, society will not allow anyone to be without essential medical care, even if his inability to pay for it reflects improvidence rather than poverty. Therefore, it is unlikely that direct assistance in kind in the health field can be eliminated until a comprehensive, compulsory health insurance plan is adopted.

  Integration with Social Security

  The Negative Income Tax might be integrated with social security in two ways. One approach would be to cover people by both social security and NIT allowances. In this case, as explained above, social security benefits would be counted partially or fully as income subject to offsetting tax.

  Alternatively, if minimum social security benefits were set at levels adequate for all groups, it would be unnecessary to include the aged and the disabled covered by OASDI in the Negative Income Tax plan. Those who are not now eligible under the social security system could be blanketed in, and the cost of their benefits reimbursed to the social security trust fund from the general treasury. This cost would be relatively small since the vast majority of retired people are already covered by social security.

  Nevertheless, to raise the benefits of social security to levels high enough to make the Negative Income Tax unnecessary for retired people would probably be too expensive to be feasible. The present minimum social security benefits of $792 a year for a retired worker and his wife would have to be raised substantially, and it is unlikely that this could be done without increasing OASDI benefits across the board. This would be an expensive and inefficient way to meet the objectives of income assistance, because large amounts of additional social security benefits would be paid to people whose incomes are adequate.

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  Basic Income on the Agenda

  Policy Objectives and Political Chances

  • Robbert-Jan Veen, Loek Groot, Robbert-Jan van der Veen(Authors)
  • 2000(Publication Date)
  • Amsterdam University Press

    (Publisher)

  Arguing for a Negative Income Tax in Germany Joachim Mitschke * Introduction At the 1998 Amsterdam Congress of BIEN, three alternatives of providing basic secu-rity consistently with raising employment were discussed: 1. a tax-financed, institutionally independent and unconditionally granted basic income, 2. a Negative Income Tax and 3. a permanent wage subsidy. As I shall argue, I am in favour of a Negative Income Tax (henceforth NIT). However, my arguments are not meant to claim comprehensive validity independently of national or historical conditions. My position is more modest. It is based upon the contemporary institutions of the tax and transfer system in Germany, which is marked by a historic dualism of tax-financed social benefits and contribution-financed social insurance entitlements of wage-earners. My plea for NIT, in the form of the Citizens Income Plan ‘Bürgergeld’ addresses the experiences, debates and expectations sur-rounding policies of income taxation, social security and the labour market as they exist in Germany. My argument in favour of Bürgergeld thus rests on a specifically German evaluation of current social problems and worthwhile social goals. In general, I take the view that each country has to find its own ways and means to achieve a social optimum, even though the different alternatives of providing basic security have general advantages and disadvantages not limited to either a specific loca-tion or time period . While my ranking of these alternatives in terms of their problem-solving capacities is addressed to the German case, it may offer insights that are useful in other countries, to the extent that similar problems and similar goals exist in those.

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  Better Living through Economics

  • John J. Siegfried, John J. Siegfried, John J. Siegfried(Authors)
  • 2010(Publication Date)
  • Harvard University Press

    (Publisher)

  c h a p t e r t h r e e Economics and the Earned Income Tax Credit Robert A. Moffitt Economics and the Earned Income Tax Credit p 89 Economic Analyses of Work Incentives and Assistance Programs for the Poor That individual work effort responds to financial incentives to work is a very old idea in economics and is the basis of the standard economic model of welfare reform. Economists’ belief in the importance of financial incentives in work decisions is not merely theoretical but has been sup-ported by an extensive body of empirical work. This is particularly true for women in the population, where statistical work has shown that greater financial incentives through a Negative Income Tax lead to non-trivial increases in work effort (Killingsworth 1983). The empirical evi-dence on the responsiveness of prime-age able-bodied males to financial incentives is more mixed, with some evidence suggesting much lower re-sponsiveness. These empirical patterns have played a role in the develop-ment of the EITC and other welfare reform measures, as elaborated later. The application of the idea of work incentives to welfare reform saw its greatest development in economic analysis in the 1960s and 1970s. Most of that discussion focused on the idea of a Negative Income Tax (NIT), which played a larger role in public discussions and legislative activity at the time than the idea of an earnings subsidy, of which the EITC is an ex-ample. Nevertheless, the intellectual and policy origins of the EITC come directly from the discussions of an NIT, and it is therefore necessary to understand the NIT before one can fully understand the EITC. The economist Milton Friedman is most associated with the idea of an NIT because he introduced the idea in a volume of essays published in 1962 (Friedman 1962; see Moffitt 2003b for a discussion of the evolution of the idea of an NIT).

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