Universal Refundable Tax Credits

This chapter proposes “Universal Refundable Tax Credits” as the practical administrative mechanism for implementing the income security reforms outlined in the book. Adopting an integrated approach to taxation and benefits, the authors argue that the Negative Income Tax (NIT)-type basic income is best administered through the tax system. This framework facilitates the conversion of regressive “tax expenditures”—specifically personal income tax allowances—into universal refundable tax credits, effectively establishing a “Broad Common Wealth Basic Income” that enhances progressivity and transparency. The chapter addresses key implementation challenges, advocating for a comprehensive definition of income that includes capital gains and imputed rent, while proposing a “dual-track” operation to ensure administrative feasibility. Furthermore, the authors propose transforming the existing Earned Income Tax Credit (EITC) into a “Universal EITC”. By eliminating the phase-out range and shifting to an individual-based unit, this reform aims to resolve the work disincentives and marriage penalties inherent in current household-based systems. Conceptualized as a form of “Participation Income,” the Universal EITC complements the NIT-type basic income by lowering Participation Tax Rates and Effective Marginal Tax Rates for low-income workers, creating a synergistic safety net.