Criticism
The main drawback is one commonly found in almost any income-based tax system: it requires considerable reporting and supervision in order to avoid fraud. The incentive to commit fraud may be increased with a NIT, since the monetary reward for fraud could be larger than a taxpayer's total tax liability. The added expense of policing fraud could offset the benefit from reducing administration costs resulting in a net increase in costs.
Another criticism is that the NIT might reduce the incentive to work, since recipients of the NIT would receive a guaranteed minimum wage equal to the government payment in the absence of employment. A series of studies in the United States beginning in 1968 attempted to test for effects on work incentives. The studies showed minimal disincentives, but were difficult to analyze as the monetary benefits were rarely as generous as those already received through the traditional welfare system. These results lead to an apparent dilemma of maintaining the benefits of existing programs through an NIT without creating significant disincentives and while restricting coverage to any manageable portion of the population.
Read more about this topic: Negative Income Tax
Famous quotes containing the word criticism:
“However intense my experience, I am conscious of the presence and criticism of a part of me, which, as it were, is not a part of me, but a spectator, sharing no experience, but taking note of it, and that is no more I than it is you. When the play, it may be the tragedy, of life is over, the spectator goes his way. It was a kind of fiction, a work of the imagination only, so far as he was concerned.”
—Henry David Thoreau (1817–1862)
“Good criticism is very rare and always precious.”
—Ralph Waldo Emerson (1803–1882)
“When you overpay small people you frighten them. They know that their merits or activities entitle them to no such sums as they are receiving. As a result their boss soars out of economic into magic significance. He becomes a source of blessings rather than wages. Criticism is sacrilege, doubt is heresy.”
—Ben Hecht (1893–1964)