Negative Income Tax (NIT) is Preferable to UBI

NIT, UBI, Guaranteed Income et al, are ultimately functions of our tax, fiscal, and monetary systems. Whatever initialism is used the same end results will be realized. A NIT is the most appropriate way of describing how a UBI etc. will be implemented and ultimately paid for. 

The Case Against UBI

The image that pops into mind with UBI is that of a monthly cheque showing up at everyone’s door whether requested or not. Such a program will not come to pass.

UBI, through the magic of the internet and social media, has come to represent for many, the tip of the government’s spear into control over the individuals daily affairs. This negative branding has lost a sizable percentage of “never will buy into the idea” citizens. 

The universality of UBI, like government-paid healthcare, is a non-means-tested entitlement with the only caveat being a citizen has to want it and ask for it. In other words just because open heart surgery is “free”, most healthy individuals won’t seek it out or want it. This caveat puts an end to the notion of an unrequested cheque showing up (or worse being automatically deposited into a bank account.) Why? Taxes, clawbacks, and the associated paperwork. A great many will still want, request, and be quite happy to fill out any required slips in order to receive what they determine to be as needed additional income.

How much monthly income is too much income is up to the individual to determine. Therefore, this amount will and should vary between $0 and a maximum (universal) amount, as determined by program administrators. As with most other forms of income, a government provided income will be taxed, and at the end of the tax year, tallied.

The behemoth that is the government’s tax department is not going anywhere anytime soon. The tax avoidance programs that higher income individuals enjoy are not going anywhere anytime soon. Government income is next to impossible to not declare, but there do exist systems of deductions and tax credits that can be used in order to reduce (avoid) tax obligations.

A standard, universally-understood tax reduction device that is built into the income tax system is the basic personal tax credit (usually the first line in the tax deduction portion of a tax calculation form). This “credit” assumes that the tax filer has in essence prepaid this amount, and therefore may reduce this from his or her taxable income. The personal credit reduction is available as a whole number, not an integer, i.e. not allowed to go into the negative and therefore not refundable. Enter NIT.

By allowing the Basic Personal Tax reduction to enter into the negative, lower and zero income tax filers will find a tax refund that will reach up to the total amount of the stated tax credit. (The personal tax credit amount usually hovers around a nation’s poverty line.) These tax refunds theoretically could be returned as a lump sum, but it are more likely and preferably to be returned as a monthly installment. Here we have the basic framework of a guaranteed monthly income program, albeit based on a persons previous year’s situation.

By tweaking the regulations in the tax system, a monthly, taxable prepayment of a refund (based on a zero income for the current year assumption) can be made available to all.

Article by Ward Smith

The Corsica Assembly votes for a Negative Income Tax with a notional basic income

There is a translation of this article into French

On 30 April 2020, the six political groups met through video conference to deliberate on a long-awaited report. Since 2017, an ad hoc committee has been studying the possible advantages and conditions for a Basic Income in the island of Corsica. The report was proposed by Jean-Guy Talamoni, the chairman of the Assembly, who got deeply involved in the preparation work.

The mechanism proposed by the report is inspired by Tony Atkinson’s “basic income flat tax proposal”. * Since 2019 the French tax administration has been aware of almost all of the income of individuals on a monthly basis. Using this data, a monthly tax is computed using a personalized rate. For most of the top 20% of incomes, the tax calculation follows a strict formula: 30 % of the income less 498.52 euros per individual (thus 498.52 for a single person and 997.04 for a couple).

As a matter of fact, the amount granted to the least advantaged in the society – known as the RSA – is almost the same: 497.01 euros for a single person, often supplemented by housing and family benefits. The Corsican project proposal is for a monthly Negative Income Tax to bridge the income tax calculation and the allowance for the poor.

Each month the tax administration would compute the difference between a 500 euros notional ‘basic income’ for each adult and 30 % of the income earned during the past month. This way, all people with a monthly income below 1,667 euros will receive their 500 euros less the tax by automatic transfer to their bank account. Those with higher incomes will automatically be charged monthly by the tax less 500 euros.

The next step of the project is to gain support from the French ministry of Finance to implement an experimental monthly income tax calculation in Corsica.

For many decades, millions of tourists flew to Corsica because of its unique landscape, beaches, mountains, culture and history. The island of Napoleon Bonaparte will certainly continue to welcome visitors and maybe display in the near future the pride of experimenting with the first wholly financed genuine Negative Income Tax with a notional basic income in Europe.

A translation of the Corsican report is available here for international review and comments.

* A.B. Atkinson, Public Economics in Action: The Basic Income/Flat Tax Proposal, Oxford: Clarendon Press, 1995

Marc de Basquiat is Chair of the French Association pour l’Instauration d’un Revenu d’Existence (AIRE)

An article about the initiative can be found here.

South Africa: The “Purple Cow” party is proposing a Negative Income Tax form of basic income

South Africa: The “Purple Cow” party is proposing a Negative Income Tax form of basic income

“Innovation. Disruption. No BS – because we love our country.” That is the “Purple Cow” party power tag. The party is officially called “Capitalist Party of South Africa”, and is defending the basic income policy, particularly in the Negative Income Tax (NIT) form.

The party is proposing an income top-up for all those earning less than the tax threshold in South Africa, which is adjusted for inflation and age. Below this level, working citizens do not pay (income) tax. If, for a given citizen, the tax paying threshold is 78000 Rands/year (5536 US$/year), the party is proposing to tax the difference between the person’s income and the threshold at a 50% rate, offering the rest as a top-up (NIT). In a numerical example, a person earning the minimum wage of 3500 Rand/month (248 US$/month), or 42000 Rand/year (2981 US$/year), would get an extra amount of 1500 Rands/month (106 US$/month) (the difference between 78000 Rands/year and 42000 Rand/year, divided by two, monthly). That amounts to a 43% increase in monthly income. The policy extends to all people below the threshold, including unemployed, in or out of social benefits. That means, in practice, that no one ever gets less than 3250 Rands/month (231 US$/month), which is close to the South African official minimum wage. To contextualize, social retirement grants from the South African government, presently goes only as far as 1700 Rand/month (121 US$/month) (around half the minimum wage).

In a short explicative video, the Capitalist Party refers that, due to the tax system rules, fewer and fewer people are paying taxes, since unemployment is growing faster than employment. This, of course, places great pressure on social security, in order to disburse social grants to around 17 million people (out of a 55 million country population). So, the way in which the NIT is financed gets to be crucially important.

To that end, and over the 78000 Rands/year income threshold, however, taxes would have to increase significantly. In the “Purple Cow” proposal, individuals earning 125000 Rand/month (8872 US$/month) or more would be taxed around 47%, or a 31% increase from what they are paying at the moment. Although this final tax value is not unprecedent, not even uncommon among, for example, north European countries, it may be hard to go for such an increase in one single step, within the South African context. To moderate the expected tax hike for the better off, the party’s coordinator Kanthan Pillay speaks of applying the NIT scheme to only those in paid employment. That, however, is contrary to the spirit of universality (professed in the proposition itself), and overlooks the fact that unemployment and near-unemployment rates as high as 40% in the country.

Pillay also explains that the party’s proposal aims at improving the labour force competitiveness with other countries, such as China. The question remaining might be to know if the “Purple Cow” party is proposing to give financial safety to all South Africans, or to help degrading the labour force’s human rights (both might not be possible).

Admittedly, as professed by Kanthan Pillay, the NIT proposal “is our riposte to the constant clamour for the Basic Income Grant”. However, and according to him, it should be a policy to “conquer unemployment”, given the path of jobs destruction created by automation, and to abolish the minimum wage, welfare, social security and government assisted programs. The “Capitalist Party of South Africa”, therefore, seems to adhere closely to the original principles set forth by Milton Friedman, when he first introduced the NIT concept in the United States.

More information at:

Reg Rumney, “The Purple Cow’s basic income plan is either genius or a bovine patty”, Business Maverick, 25th March 2019

The “Purple Cow” website

CANADA: Canadian Association of Social Workers Recommends UBIG of $20,000 As a Better Alternative Than Negative Income Tax

CANADA: Canadian Association of Social Workers Recommends UBIG of $20,000 As a Better Alternative Than Negative Income Tax

On October 30th 2017, the Canadian Association of Social Workers (CASW) released a position paper recommending a Universal Basic Income Guarantee (UBIG) of $20,000 for all individuals, regardless of income. CASW’s UBIG fulfils the definition of a Basic Income. CASW argues that a UBIG is superior to a Negative Income Tax, which is being tested in other experiments (1).

CASW argues that a universal demogrant model, or UBIG, is “a cost-effective and socially responsible mechanism through which Canada can ensure dignity for all”.

CASW states there have been many federal promises to end poverty in Canada over the past 30 years, in many different forms, including Canada’s support for the United Nations’ Sustainable Development Goals which specifies the need to “end poverty in all its forms everywhere”. Yet in 2016, 4 million Canadians (12.9%) were living in poverty and child poverty rates even increased between 1989 and 2013.

According to CASW, conditional and heavily monitored programs are insufficient and expensive. The combined income support-related expenditures of all federal, provincial, and municipal levels of the Canadian government cost just over $185 billion. Furthermore, their implementation causes a great deal of stress given their unreliable nature, with individuals reporting stress brought on by stigma, marginalization and feelings of disempowerment and hopelessness.

CASW claims that “current social assistance systems in Canada are inadequate and contribute to a cycle of poverty”.

Poverty is a well-known social determinant of physical and mental health. CASW illustrates this with several UBI-related examples from Canada:

  • a difference of more than 20 years in life-expectancy between the high-income and low-income population in Hamilton, Ontario;
  • a reduction of 8.5% on hospitalization during the Mincome basic income pilot project in Dauphin, Manitoba (2);
  • people between 55 and 64 years of age are 50% more likely to experience food insecurity compared to seniors 65 years or older who receive the Old Age Security pension.

From CASW’s perspective, the strengthening of Old Age Security (OAS) and the introduction of the Canada Child Benefit were solid steps towards realizing a UBIG in Canada. Programs like the OAS, which are universal in nature and have few eligibility criteria, are quite inexpensive to operate. In 2013, the total cost of operating the OAS program was 0.3% of the total annual program cost. In contrast, the total administrative cost of Employment Insurance, a program with a high degree of gate-keeping and extensive eligibility criteria, was 8.1% of the total annual program cost.

According to CASW, this cost-saving potential is a fundamental strength of the UBIG which would operate under significantly fewer operational and administrative costs than, for example, a negative income tax model.

CASW further argues that the so-called “benefit trap”, that makes the adoption of part-time work unattractive and is often used to argue against a basic income guarantee, in fact only exists within the negative income tax model. Therefore, the true benefits of a basic income guarantee cannot be realized within the negative income tax model which has formed the basis of all of the pilot projects run so far in Canada.

In addition, a universal demogrant model involves significant benefits to the middle classes giving it a wider support base compared to a program that only targets low-income households.   It will therefore have more likelihood of success.

CASW recommends a UBIG of $20,000 per year with the possibility of additional fully-remunerated casual, part-time, or full-time employment. Individuals with disabilities would receive an extra $6,000 tax free per year. The UBIG should replace only traditional welfare or social assistance programs – not all existing social programming. One’s net income will then be taxed according to progressive tax brackets. This model encourages participation in the labour market.



(1) – A Negative Income Tax does not pay an unconditional income to every individual. Instead, it tops up earnings below a threshold, and charges tax on earnings above the threshold. The administration of a Negative Income Tax poses more challenges than the administration of a Basic Income.

(2) – This is a significant amount considering the Canadian Institute for Health Information in 2014 put the total health expenditure in Canada as upwards of $200 billion.


More information at:

Colleen Kennelly, “Universal Basic Income Guarantee: The Next ‘BIG’ Thing in Canadian Social Policy”, Canadian Association of Social Workers (CASW), October 2017


Picture: Two sides of the same Loonie … (10/100), Jamie McCaffrey, CC BY-NC 2.0