The Freeman 1972 - The Ludwig von Mises Institute

1972 SHOULD WE DIVIDE THE WEALTH? 103VVe have to face the fact thatthere are a substantial number ofpeople who would rather live innear-destitution without workingthan to live comfortably at thecost of accepting the disciplines ofa steady job. The higher we raisethe income guarantee (and oncewe adopted it, the political pressureswould be for raising it constantly),the greater the numberof people who would see no reasonto work.Nor would a so-called ~'NegativeIncome Tax" do much to solve theproblem. The Negative IncomeTax is merely a misleading euphemismfor a tapered-off guaranteedminimum income. The proposalis that for every dollar thata man earns for himself, his governmentincome subsidy would bereduced, say, only 50 cents, insteadof being reduced by thewhole amount that he earns. Inthis way, it is argued, his incentivefor self-support would not beentirely destroyed: for every dollarhe earned for himself he would beable to retain at least half.This proposal has a certain surfaceplausibility; in fact, the presentwriter put it forward himselfmore than thirty years· ago, 3 butabandoned it shortly thereafterwhen its flaws became evident. Letus look at some of these:3 In The Annalist (published by TheNew York Times), Jan. 4, 1939.• 1. The NIT (negative incometax), by neglecting the careful applicant-by-applicantinvestigationof needs and resources made bythe traditional relief system,would, like a flat guaranteed income,open the government to massivefraud. It would also, like theflat guaranteed income, force thegovernment to support a familywhether or not it was making anyeffort to support itself.• 2. It is true that the NITwould not destroy incentives quiteas completely as the flat guaranteedincome, but it would seriouslyundermine them nonetheless. Itwould still give millions of peoplea guaranteed income whether theyworked or not. Once more we mustkeep in mind that there are a substantialnumber of people who prefernear-destitution in idleness toa comfortable living at the costof working. It is true that underthe NIT scheme they would be allowedto keep half of anythingthey earned for themselves up tonearly twice the amount of thebasic NIT benefit, but they wouldtend to look upon this as theequivalent of a tax of 50 percenton these earnings, and many wouldnot think such earnings worth thetrouble.• 3. The NIT might prove evenmore expensive for the taxpayersthan the flat guaranteed income.The sponsors of NIT, in their