How Negative Income Tax could Benefit the US.

Negative Income Tax is a progressive tax system that was developed in the 1940s but has never been fully implemented. How the original concept of a negative tax system would work is that a person who made under a certain amount would receive an income inverse to the rate that a person over the amount would pay. This would mean that if the salary limit was 10000 and the tax rate was 25%. Any individual who made more than 10000 would pay 25% of their salary. Any individual who made less would receive 25% as payment.

It was believed that it would not only provide a fair and simple tax but incentivize welfare recipients to work as they would not longer be concerned about losing their benefits. The idea was tested but was not very successful as those receiving welfare had little incentive as the tax payments were less than the benefits they had been receiving.

Negative Income tax could be successful if certain aspects were changed. Rather than use an actual tax rate for computing benefits there should be across the board tax credit that would be based on the cost of living. For example if it was determined that an individual in the USA required a wage of 50000$ in order to survive than this would become the tax credit. This would mean that if that individual made 25000 one year that they could receive a 25000 check for the next year. It could either be a lump sum or broken up into monthly payments. If the individual ended up making 75000 any amount over 50000 would be taxed at a fair rate such as 25%. In order to encourage a person to be gainfully employed an individual who was not working at all for reasons other than disability, age, or child-rearing would earn half of the credit.

Such a system could not only make taxation simpler but it can also take the place of social programs such as Social Security, welfare, and food stamps. Due to the fact that a person in order to receive the credit would have to file a tax return it would reduce the amount of fraud in the welfare system. An individual would automatically receive what was due without going through inefficient bureaucracy which costs tax payers millions of dollars each year.

Other ways a negative income tax could be of benefit would be is that it could take the place of minimum wage. Minimum wage places a burden on businesses because they are told by the government how much a worker is valued regardless of they actually provide that value to the business owner. This can result in keeping less skilled workers out of the work place. When it comes to figuring retirement benefits an age can be added. Once an individual reaches retirement age they will automatically receive the full amount regardless of whether they have worked or not. A final reason would be an effective means to conduct census as every person would have an incentive to file.

There are a few arguments against the negative income tax . It is believed that it would encourage people to not work as they would get payment regardless. It is true that some may not work if it is not required but this happens on our welfare programs now. The Negative income tax would simply replace our current welfare system with one that does not punish one for working. At least 30% of welfare recipients work either officially or under the table. Many are reluctant to take on more responsibility due to the concern of losing their benefits. Negative income tax would take away that problem. A person can earn as much as they want without having to worry whether or not they will lose everything . Also consider that many who are not working have been part of the prison system. Once in the prison system it can be extremely difficult to get back into the workforce again. It is a well known fact that poverty increases the crime rate and the chances individuals will not finish school. A negative income tax could solve both these problems as the individuals could finish school without having to worry about supporting family.

 Not only can Negative Income Tax simplify how Taxes are collected. It can also create a more efficient welfare system. One that is harder to defraud and immediately gives aid to those who need it most to prevent crises from occurring. It could encourage higher graduation rates and lower prison incarceration rates. If the entire world were to adopt this system we could be one step closer to eradicating world poverty.