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.
Negative income taxes can implement a basic income or supplement a guaranteed minimum income system.
The main drawback is one commonly found in almost any income-based tax system: it requires considerable reporting and supervision in order to avoid fraud. The incentive to commit fraud may be increased with an NIT, since the monetary reward for fraud could be larger than a taxpayer's total tax liability. The added expense of policing fraud could offset the benefit from reducing administration costs resulting in a net increase in costs.
Another criticism is that the NIT might reduce the incentive to work, since recipients of the NIT would receive a guaranteed minimum wage equal to the government payment in the absence of employment
Negative income taxes can implement a basic income or supplement a guaranteed minimum income system.
The main drawback is one commonly found in almost any income-based tax system: it requires considerable reporting and supervision in order to avoid fraud. The incentive to commit fraud may be increased with an NIT, since the monetary reward for fraud could be larger than a taxpayer's total tax liability. The added expense of policing fraud could offset the benefit from reducing administration costs resulting in a net increase in costs.
Another criticism is that the NIT might reduce the incentive to work, since recipients of the NIT would receive a guaranteed minimum wage equal to the government payment in the absence of employment
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