ABSTRACT
The ‘negative income tax’ proposals typically subject allowance recipients to a special offsetting tax with a rate less then 100 per cent but greater than the low-bracket rates of the regular income tax. At sufficiently high incomes the offsetting tax produces a negative net benefit to the family unit as large as or larger than its liability under the regular income tax. The authors strongly support some sort of negative income tax (NIT) plan, and indeed they have some specific proposals regarding basic allowance schedules and offsetting tax rates. The chapter examines some of the sticky technical problems that must be solved if any such plan is to be implemented. It provides rough estimates of the cost of several alternative NIT plans. Under the NIT proposal the government would pay net benefits to many families who pay no taxes.
