Question

What are the strengths and weaknesses of the negative income tax (NIT) as an alternative to traditional welfare programs?

Answer 1

Strength and weakness of negative income tax

A negative income tax would solve to main problems it would give people cash as opposed to in kind benefits and have a much lower tax rate. People would Still lose benefits the more they made with a negative income tax they would always come out ahead with the higher income. Negative income tax is a way to provide people below a certain income level with money.in contrast to a standard income tax where people pay more to the government people with low income would receive money back from the government.to get a negative income tax subsidy the needy wood along with other taxpayer simply file income tax return. The Income-Tax returns computerized system food then quickly and objectively identified taxpayers with income below the threshold as eligible for help.

Strength of negative income tax
Taxpayers with income above the threshold would pay taxes in a cash amount equal to the difference and taxpayers with income below the threshold would receive negative income tax refundable credits in a cash amount equal to the difference.negative income tax as a mirror image of the existing tax system where tax liabilities of above the threshold taxpayers very positively with income according to a tax rate schedule and tax benefits of below the threshold taxpayer vary inversely with income according to a negative tax rate schedule.

Weakness of the negative income tax:-
If too many of the working poor succumbed to this income effect and this substitution effect the swelling number of of needy with income below the threshold and eligible for negative income tax refundable credits would make total negative income tax cost untenable. Negative income tax promises of a threshold income guarantee would cause the working poor to work less or quiet entirely to substitute in in leisure activities scenes veg reduce but may not exceed the guarantee, particularly after Parul and state and local income tax are taken out.