Negative Income Tax-based Subsidy Program
A Negative Income Tax-based Subsidy Program is a progressive income tax program where tax payers earning below a certain income amount receive supplemental pay (instead of paying taxes).
- Context:
- It can (typically) be a Workfare Program.
- It can (typically) be managed by a Taxation Authority.
- Example(s):
- Counter-Example(s):
- See: Capital Tax, Income Tax.
References
2014a
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/negative_income_tax Retrieved:2014-6-17.
- In economics, a negative income tax (abbreviated NIT) is a progressive income tax system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government. Such a system has been discussed by economists but never fully implemented. It was developed by British politician Juliet Rhys-Williams in the 1940s and later by United States economist Milton Friedman.
Negative income taxes can implement a basic income or supplement a guaranteed minimum income system.
In a negative income tax system, people earning a certain income level would owe no taxes; those earning more than that would pay a proportion of their income above that level; and those below that level would receive a payment of a proportion of their shortfall, which is the amount their income falls below that level.
- In economics, a negative income tax (abbreviated NIT) is a progressive income tax system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government. Such a system has been discussed by economists but never fully implemented. It was developed by British politician Juliet Rhys-Williams in the 1940s and later by United States economist Milton Friedman.
2014b
- http://usbig.net/bigblog/2014/06/review-of-the-second-machine-age-work-progress-and-prosperity-in-a-time-of-brilliant-technologies
- The NIT and the UBI are both BIGs, by that, I mean they both guarantee a certain level below which no one’s income will fall — call this the “grant level.” Both allow people to live without working. UBI does this by giving the grant to everyone whether they work or not, but taxing them on their private income. NIT does this by giving the full grant only to those who make no private income and taking a little of it back as they make private income. In standard economic theory, the “take-back rate” of the NIT is equivalent to the “tax-rate” of the UBI, and so either one can be called “marginal tax rate.”
Applying standard mainstream economic theory (which is used throughout the book), the variables that affect people’s labor market behavior are the grant level and marginal tax rate. The higher the grant level and the higher the marginal tax rate, the lower the incentive to work whether the BIG is an NIT or a UBI. You can have an NIT or a UBI with high or low marginal tax rates and grant levels, and you can have a UBI or an NIT that have the same grant level and marginal tax rate.
- The NIT and the UBI are both BIGs, by that, I mean they both guarantee a certain level below which no one’s income will fall — call this the “grant level.” Both allow people to live without working. UBI does this by giving the grant to everyone whether they work or not, but taxing them on their private income. NIT does this by giving the full grant only to those who make no private income and taking a little of it back as they make private income. In standard economic theory, the “take-back rate” of the NIT is equivalent to the “tax-rate” of the UBI, and so either one can be called “marginal tax rate.”
2013
- http://www.investopedia.com/terms/n/negativeincometax.asp
- A guaranteed minimum income plan advocated by economist Milton Friedman in 1962 where federal income subsidies are provided to persons or families whose income falls below a certain level. Negative income tax (NIT) would allow claimants to receive income through the simple filing of tax returns rather than through the claiming of welfare benefits, ideally eliminating the need for a complex welfare bureaucracy.
The primary criticism of the negative income tax is that it discourages some low-income individuals from working. If one can receive $2,500 from the government for not working at all versus $5,000 for dozens of hours of work, some people will choose to not work because they would rather have more leisure time even if it means less money and an inability to meet basic living expenses.
Another criticism is that a negative income tax system cannot eliminate the complexities associated with the welfare system because the taxpayers who fund the subsidies demand accountability from the taxpayers who receive the subsidies. This demand necessitates a complex system of rules and oversight intended to prevent abuse of the system.
- A guaranteed minimum income plan advocated by economist Milton Friedman in 1962 where federal income subsidies are provided to persons or families whose income falls below a certain level. Negative income tax (NIT) would allow claimants to receive income through the simple filing of tax returns rather than through the claiming of welfare benefits, ideally eliminating the need for a complex welfare bureaucracy.
1978
- (Burtless & Hausman, 1978) ⇒ Gary Burtless, and Jerry A. Hausman. (1978). “The Effect of Taxation on Labor Supply: Evaluating the Gary negative income tax experiment.” In: The Journal of Political Economy.
1962
- (Friedman, 1962) ⇒ Milton Friedman. (1962). “Capitalism and Freedom." University of Chicago press.