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Expanding the Discourse on Antipoverty Policy: Reconsidering a Negative Income Tax

This article proposes that advocates for the poor consider the replacement of the current means-tested safety net in the United States with a Negative Income Tax (NIT), a guaranteed income program that lifts families’ incomes above a minimum threshold. The article highlights gaps in service provision that leave millions in poverty, explains how a NIT could help fill those gaps, and compares current expenditures on major means-tested programs to estimated expenditures necessary for a NIT. Finally, it addresses the financial and political concerns that are likely to arise in the event that a NIT proposal gains traction among policy makers.

2015

Academic Paper

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A NIT set at 100% of the poverty line with a 50% phaseout rate would've cost $219 billion in 2004 (using 2007) dollars. A NIT with an income threshold at the federal poverty line and a 33% phaseout rate would cost $336 billion, and phaseout completely at 303% of the poverty line. In 2007, the U.S. spent $207 billion on means-tested welfare, and only lifted 9.7 million of the 37.3 million Americans living in poverty. Reducing welfare eligibility criteria from patchwork means-testing to solely on the basis of income as reported to the IRS should increase take-up rates, reduce stigma, and significantly cut administrative costs relative to the current safety net. Regarding non-labor income such as basic income, income effects & substitution effects countervail one another, so that the overall effect on individual working time is ambiguous. Across four US and one Canadian NIT experiments, reduced labor supply averaged between 5% - 7.9% reduction for men, 17% - 21% for married women with children, and a 7% - 13.2% reduction for single women with children.
Luke Shaefer Elizabeth Rhodes Jessica Wiederspan
Basic Income
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