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Implementing a Negative Income Tax. Net Cost, Poverty and Inequality Effects


  • Rafael Granell Pérez

    () (Universidad de Valencia)

  • Amadeo Fuenmayor Fernández

    () (Universidad de Valencia)


The main aim of this paper is to propose a financially viable alternative to the current Spanish system of social protection: A Negative Income Tax (NIT) unifying in a single mechanism the system of pub¬lic benefits and income tax. We analyse the main characteristics of the NIT and simulate several NIT proposals for Spain, using the Living Conditions Survey. These proposals are distinct in that they do not suppose an additional cost in the tax-benefit system. The results of our simulations indicate a radi¬cal improvement in the indicators of poverty and inequality, especially extreme poverty, and also a redistribution of income from the elderly to families with children

Suggested Citation

  • Rafael Granell Pérez & Amadeo Fuenmayor Fernández, 2019. "Implementing a Negative Income Tax. Net Cost, Poverty and Inequality Effects," Hacienda Pública Española, IEF, vol. 228(1), pages 83-108, March.
  • Handle: RePEc:hpe:journl:y:2019:v:228:i:1:p:83-108

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    References listed on IDEAS

    1. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    2. Jonathan H. Hamilton, 2010. "2009 Presidential Address - Optimal Tax Theory: The Journey from the Negative Income Tax to the Earned Income Tax Credit," Southern Economic Journal, Southern Economic Association, vol. 76(4), pages 861-877, April.
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    More about this item


    Basic Income; Negative Income Tax; Poverty; Inequality; Microsimulation.;

    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs


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