What Is Negative Income Tax?

Negative income tax (NIT) is an alternative to welfare suggested by, among other proponents, economist Milton Friedman in his 1962 book Capitalism and Freedom. NIT proponents assert that every American without income above the 澳洲幸运5开奖号码历史查询:threshold for tax liability should have a 澳洲幸运5开奖号码历史查询:basic income guarantee aཧnd that NIT is a means to subsidize&nbs🎶p;the needy at less cost than the welfare system.

Negative Income Tax Explained

To get a negative income tax subsidy, the needy would, along with other taxpayers, simply file 澳洲幸运5开奖号码历史查询:income tax returns. The IRS’ computerized system could then quickly and objectively identify taxpayers with income below the threshold as eligibl꧅e for help.

NIT proponents envisioned negative income tax (NIT) as a mirror image of the existing tax system where 澳洲幸运5开奖号码历史查询:tax liabilities of above-the-threshold taxpayers vary positively with income according to a 澳洲幸运5开奖号码历史查询:tax rate schedule; and 澳洲幸运5开奖号码历史查询:tax benefits of below-the-threshold taxpayers vary inversely with income according to a negative tax rate (or benefit-reduction) schedule. Taxpayers with income above the threshold would pay taxes in a cash amount equal to the difference (‘positive taxes’) and taxpayers with income below the threshold would receive NIT 澳洲幸运5开奖号码历史查询:refundable credits in a cash amount equal to the difference🐠 (‘negative taxes’).

NIT opponents applying 澳洲幸运5开奖号码历史查询:labor-supply economic theories worried that negative income tax (NIT)’s promise of a threshold income guarantee would cause the working poor to work less or quit entirely to substitute in leisure activities since wages reduce but may not exceed the guarantee, particularly after payroll and state and local income taxes are taken out. If too many of the working poor succumbed to this 澳洲幸运5开奖号码历史查询:income effect and this 澳洲幸运5开奖号码历史查询:substitution effect, the swelling numberꦍ of needy with income below the threshold and ꦕ;eligible for NIT refundable credits would make total negative income tax (NIT) costs untenable.