Abstract

The cost of a negative income tax (NIT) designed to mimic the redistributive effects of a universal basic income (UBI) and set at a level sufficient to eliminate official poverty in the US is estimated using income distribution data for 2002. It is estimated that an NIT satisfying these conditions would have required an $826 billion increase in government spending in 2002, compared to a $1.69 trillion increase for an equivalent UBI. Despite this cost difference, the income and substitution effects of a UBI and an equivalent NIT are shown to be the same; and these effects are analyzed. Finally, the cost of providing a basic income guarantee (BIG) by either of these means is compared to the cost of securing the right to work and income security recognized in the Universal Declaration of Human Rights using a program of direct job creation and conventional income transfers.

Recommended Citation

Harvey, Philip L. (2006) "The Relative Cost of a Universal Basic Income and a Negative Income Tax," Basic Income Studies: Vol. 1 : Iss. 2, Article 6.
Available at: http://www.bepress.com/bis/vol1/iss2/art6