A Negative Income Tax

Income taxes generate a lot of negative thoughts. A Negative Income Tax could however be a positive thing. The concept is simple. Above a certain income level X, you start to pay a percentage of your income in taxes. Small percentages at first, growing in size on incomes at higher levels. If you make below the X income level, you receive money, first in small percentages, and larger the farther below X your income falls.

A Negative Income Tax (NIT) is essentially a UBI (Universal Basic Income) plan, which has the theoretical benefit of specifically targeting those that need it the most.

The following diagram illustrates the concept:

The numbers in this chart are arbitrary, designed to make a point, but roughly speaking, these numbers would align with an actual NIT proposal. The value in a NIT plan appears to be in it’s ability to accurately target and assist those in greatest need of a social safety net.

The intention of a NIT is not to reduce the responsibilities of a Social Democracy in other sectors, such as housing, healthcare, etc., on the assumption that those receiving NIT can afford it. The intention is to address one of the economic rights that people would have in a Social Democracy: The right to a social safety net. We don’t let anyone fall through the cracks. Eliminating poverty and the ill-effects of poverty is essentially the role of the state, and something like a NIT or similar UBI program could be very useful.

Do you think a NIT is a good idea?