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The Relative Cost of a Universal Basic Income and a Negative Income Tax

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  • Harvey Philip L.

    (Rutgers University)

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    Abstract

    The cost of a negative income tax (NIT) designed to mimic the redistributive effects of a universal basic income (UBI) and set at a level sufficient to eliminate official poverty in the US is estimated using income distribution data for 2002. It is estimated that an NIT satisfying these conditions would have required an $826 billion increase in government spending in 2002, compared to a $1.69 trillion increase for an equivalent UBI. Despite this cost difference, the income and substitution effects of a UBI and an equivalent NIT are shown to be the same; and these effects are analyzed. Finally, the cost of providing a basic income guarantee (BIG) by either of these means is compared to the cost of securing the right to work and income security recognized in the Universal Declaration of Human Rights using a program of direct job creation and conventional income transfers.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Basic Income Studies.

    Volume (Year): 1 (2006)
    Issue (Month): 2 (December)
    Pages: 1-24

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    Handle: RePEc:bpj:bistud:v:1:y:2006:i:2:n:6

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    Web page: http://www.degruyter.com

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    Cited by:
    1. Gebhard Kirchgässner, 2009. "Critical Analysis of Some Well-Intended Proposals to Fight Unemployment," University of St. Gallen Department of Economics working paper series 2009 2009-17, Department of Economics, University of St. Gallen.
    2. Mery Ferrando & Cristian Pérez & Gonzalo Salas, 2010. "Impuestos negativos a la renta en Uruguay: ¿una política redistributiva alternativa?," Documentos de Trabajo (working papers) 10-02, Instituto de Economía - IECON.

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