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The Negative Income Tax and the Evolution of U.S. Welfare Policy

  • Robert A. Moffitt

The negative income tax proposed by Milton Friedman represents one of the fundamental ideas of modern welfare policy. However, the academic literature has raised two difficulties with it, one challenging its purported work incentives and the other suggesting the possible superiority of work requirements. In addition, work requirement approaches have gained ground in actual U.S. welfare policy over the last 30 years and the number of different programs has proliferated, another development counter to the negative income tax. On the other hand, the Earned Income Tax Credit has produced a negative-income-tax-like program on a vast scale.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/089533003769204380
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 17 (2003)
Issue (Month): 3 (Summer)
Pages: 119-140

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Handle: RePEc:aea:jecper:v:17:y:2003:i:3:p:119-140
Note: DOI: 10.1257/089533003769204380
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  2. Fortin, B. & Truchon, M., 1990. "On Reforming the Welfare System: Workfare Meets the Negative Income Tax," Cahiers de recherche 9016, Université Laval - Département d'économique.
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  8. V. Joseph Hotz & John Karl Scholz, 2001. "The Earned Income Tax Credit," NBER Working Papers 8078, National Bureau of Economic Research, Inc.
  9. Charles Brown & Wallace E. Oates, 1985. "Assistance to the Poor in a Federal System," NBER Working Papers 1715, National Bureau of Economic Research, Inc.
  10. James J. Heckman, 1974. "Effects of Child-Care Programs on Women's Work Effort," NBER Chapters, in: Marriage, Family, Human Capital, and Fertility, pages 136-169 National Bureau of Economic Research, Inc.
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  12. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
  13. Neil Bruce & Michael Waldman, 1988. "Transfers in Kind: Why They Can Be Efficient and Non-Paternalistic," UCLA Economics Working Papers 532, UCLA Department of Economics.
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  16. Robert A. Moffitt, 2003. "Means-Tested Transfer Programs in the United States," NBER Books, National Bureau of Economic Research, Inc, number moff03-1, December.
  17. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  18. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  19. Jan K. Brueckner, 1999. "Welfare Reform and the Race to the Bottom: Theory and Evidence," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 505-525, January.
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