Income earned: $0
Taxes paid: $0
Taxes paid: $0
Minimum income: $10,000
Total amount: $10,000
Income earned: $30,000
Taxes paid: $7500
Minimum income: $10,000
Total amount: $32,500
Income earned: $100,000
Taxes paid: $25,000
Minimum income: $10,000
Total amount: $85,000
Income earned: $1,000,000
Taxes paid: $250,000
Minimum income: $10,000
Total amount: $760,000
Freidmen supported this idea, but only as a replacement for the current income tax and welfare system. For joint households the credit would be double and there could be an amount given per child, say $5,000. The minimum income credit could also be given in monthly increments so as not to require much money management.
This was part four of my series against self-verification.
This was part four of my series against self-verification.
Actually, I think your example here would more accurately be described as a lump sum subsidy on income. With a negative income tax, the government sets some income threshold, say $25,000, and a negative income rate, say 10%. Any family earning below this threshold level gets a check in the amount of the difference between the threshold and their income times the tax rate. So a family earning $20,000 would get a check for ($25,000-$20,000)*.1=$500 for a total income of $20,500. So the further below this threshold level (i.e. the poorer you are) the larger is your tax credit, hence the term negative income tax.
ReplyDeleteFrom an efficiency standpoint, your example would probably be even better than a negative income tax.
Oh gotcha. Yeah I think I like what I described better.
ReplyDelete