ABSTRACT
This chapter investigates the distributional implications of replacing the existing income tax and benefits system for the United Kingdom with a universal basic income. It proposes a Negative Income Tax (NIT) that includes the various means-tested social security benefits and tax credits of the existing system, and a universal income supplement based only on household status. Introducing a basic income supplement reduces inequality while replacing graduated tax rates with a single, revenue neutral, tax rate increases inequality. The chapter considers NIT proposals that add to taxable income an amount equal to the exemptions. It also considers NIT proposals that eliminate all government transfers, while allowing their role in inequality reduction to be taken up by the NIT demogrant. The chapter explores how much inequality would be reduced by increasing the demogrant. It highlights the A. Atkinson indices because people allow a ready comparison of equity and efficiency considerations.
