What Is Negative Income Tax?

Negative income tax is a form of transfer payment in the fiscal expenditure of capitalist countries. It is a claim of some modern western economists to replace the social welfare subsidy system with the form of income tax. Because this payment is exactly the opposite of progressive income tax in the flow of funds, it is named. The earliest and most active advocate of negative income tax was Milton Friedman, an American monetary economist. He opposed the current social welfare subsidy system and believed that sporadic fixed difference subsidies lacked stimulating effects on the recipients and it was detrimental to the improvement of economic efficiency. ^[1-2]

Negative income tax

Negative income tax is a method used by the government to calculate the subsidy for low-income earners at a rate based on the difference between their actual income and the need to maintain a certain level of social living. The calculation formula is:

Negative income tax = number of income guarantees-(personal actual income × negative income tax rate)

Reducing poverty through negative income taxes

Whereas the current welfare system

Table 6.1 Example of income tax with 50% tax on negative taxable income (family of four; current allowances and standard deductions; current positive income

Negative income tax will ensure a minimum income while avoiding most of the shortcomings of current benefit plans.

1. It concentrates public funds on the poor. Negative income tax has a great advantage over many current schemes: it allows public funds to focus on supplementing the income of the poor-rather than distributing funds in a targeted manner in hopes that some of them will trickle down the poor Body.

2. It treats the poor as serious and responsible people, not as incompetent and protected by the state. By providing assistance in the form of money and in accordance with objective, impersonal standards of income, negative income tax will place the poor on their own welfare status, thereby promoting the cultivation of independence and independence.

3 It empowers the poor to help themselves. The current direct assistance program actually includes 100% of the other income of recipients.

Regarding the issue of negative income taxes, people-both left and right-have raised many objections. In my opinion, most of these opinions are due to misunderstanding or utopian thinking.

1. Negative income tax excludes surveys of living conditions held before the payment of unemployment benefits. A common objection is that by making the acquisition of compensation a legitimate thing, negative income tax eliminates any investigation of living conditions and introduces new principles on the relationship between citizens and the government.

2. Negative income tax undermines enthusiasm. Some supporters of guaranteed annual income plans are actually recommending

The problem in terms of welfare is to stop the proliferation of existing bad plans and eventually abolish them. However, although these plans are generally not very good, they do, to some extent, help certain poor people. Unless we can come up with another way to get the little help that the existing plan brings to the poor, can we safely launch a political attack on the current plan? For the inevitable accusations that we are cruel and want to starve the poor, can we achieve results unless we have a satisfactory answer? If we don't have an alternative, don't we feel guilty of this accusation? Most of these plans should never be implemented. But they have already been implemented, so they can only be phased out now. This is both to promote social stability and the government's responsibility to honor its commitments.

Negative income tax provides a way to gradually replace existing plans. As a construction, it provides a launch pad from which actual political attacks on suboptimal current plans can be launched. Once implemented, it will ensure assistance to those poor people who are currently receiving assistance from the current plan, thereby allowing the repeal of the current plan to proceed, or allowing them to die out as existing commitments are fulfilled. Once implemented, it will also eliminate the paradoxical excuses currently being used to justify every proposed expansion of federal power-"need" to help some or others in need.

It can be said that these are the negative advantages of negative income tax. The positive benefits of negative income taxes are equally powerful. "It's specific to poverty. It helps individuals in the most useful form: cash. It's general, so it can be used to replace the special set of programs that are now in place. It clearly Shows the cost of society. It works outside the market. Like any other measure intended to reduce poverty, it also reduces the incentive for those who help to help themselves, but, like a subsidy for income, As a fixed minimum quota system should be, it has not completely eliminated this enthusiasm. "Moreover, compared with other measures now in place or compared with other measures now proposed, This degree of enthusiasm is less severe. Finally, it treats all members of society equally, and applies a single, impersonal form of life survey to all people, whether for those who need to pay taxes in a particular year or for those This was the case for those who were subsidized during the year.