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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)

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.

Suggested Citation

  • Harvey Philip L., 2006. "The Relative Cost of a Universal Basic Income and a Negative Income Tax," Basic Income Studies, De Gruyter, vol. 1(2), pages 1-24, December.
    • Handle: RePEc:bpj:bistud:v:1:y:2006:i:2:n:6
    DOI: 10.2202/1932-0183.1032
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    Cited by:

    1. Major Aaron, 2016. "Affording Utopia: The Economic Viability of “A Capitalist Road to Communism”," Basic Income Studies, De Gruyter, vol. 11(2), pages 75-95, December.
    2. André Cieplinski & Simone D'Alessandro & Chandni Dwarkasing & Pietro Guarnieri, 2022. "Narrowing women’s time and income gaps: an assessment of the synergies between working time reduction and universal income schemes," Working Papers 250, Department of Economics, SOAS University of London, UK, revised Apr 2022.
    3. Mery Ferrando & Cristian Pérez Muñoz & Gonzalo Salas, 2013. "Impuestos negativos a la renta en Uruguay: ¿una política redistributiva alternativa?," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, January.
    4. Cieplinski, André & D'Alessandro, Simone & Dwarkasing, Chandni & Guarnieri, Pietro, 2023. "Narrowing women’s time and income gaps: An assessment of the synergies between working time reduction and universal income schemes," World Development, Elsevier, vol. 167(C).
    5. Lewis Michael, 2012. "Cost, Compensation, Freedom, and the Basic Income – Guaranteed Jobs Debate," Basic Income Studies, De Gruyter, vol. 7(2), pages 41-51, January.
    6. Ben Spies-Butcher & Ben Phillips & Troy Henderson, 2020. "Between universalism and targeting: Exploring policy pathways for an Australian Basic Income," The Economic and Labour Relations Review, , vol. 31(4), pages 502-523, December.
    7. Honkanen Pertti, 2014. "Basic Income and Negative Income Tax: A Comparison with a Simulation Model," Basic Income Studies, De Gruyter, vol. 9(1-2), pages 119-135, December.
    8. Zelleke Almaz, 2007. "Targeting Benefit Levels to Individuals or Families?," Basic Income Studies, De Gruyter, vol. 2(1), pages 1-10, June.
    9. 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.
    10. Harvey Philip, 2012. "More for Less: The Job Guarantee Strategy," Basic Income Studies, De Gruyter, vol. 7(2), pages 3-18, January.

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