moffitt-_negative_income_tax

moffitt-_negative_income_tax - NBER WORKING PAPER SERIES...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
NBER WORKING PAPER SERIES THE NEGATIVE INCOME TAX AND THE EVOLUTION OF U.S. WELFARE POLICY Robert A. Moffitt Working Paper 9751 http://www.nber.org/papers/w9751 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 June 2003 Robert A. Moffitt is Professor of Economics, Johns Hopkins University, Baltimore, Maryland. The author is also a Research Associate, National Bureau of Economic Research, Cambridge, Massachusetts; a Research Affiliate, Institute for Research on Poverty, University of Wisconsin, Madison, Wisconsin; and Faculty Affiliate, Joint Center on Poverty Research, Northwestern University and the University of Chicago, Evanston, Illinois. His e-mail address is moffitt@jhu.edu. An original draft of this paper was presented at the Conference to Honor Milton Friedman, University of Chicago, November 8, 2002. The paper has benefited from comments by Milton Friedman, Gary Becker, and others at that conference, comments on a preliminary version by seminar participants at the London School of Economics, and comments by Charles Brown, Timothy Taylor, and Michael Waldman of this journal. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. ©2003 by Robert A. Moffitt. All rights reserved. Short sections of text not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including © notice, is given to the source.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Negative Income Tax and the Evolution of U.S. Welfare Policy Robert A. Moffitt NBER Working Paper No. 9751 June 2003 JEL No. I13 ABSTRACT 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. Robert A. Moffitt Department of Economics Johns Hopkins University 3400 N. Charles St. Baltimore, MD 21218 and NBER moffitt@jhu.edu
Background image of page 2
-3- The negative income tax represents one of the fundamental ideas of modern analysis of welfare programs. Its name derives from an opposition to a positive income tax, where the government claims a portion of income and where the amount paid increases as income rises. In contrast, the negative income tax sends money back to the taxpayer, like a refundable tax credit, but reduces the payment as income rises. The government provides a certain level of benefits, or reverse tax payment, even when income is zero, but then gradually withdraws those benefits as earned income rises. The withdrawal of benefits, or a “negative” income tax,
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 43

moffitt-_negative_income_tax - NBER WORKING PAPER SERIES...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online