CBPP: Commentary: Arloc Sherman: Policymakers Often Overstate Marginal Tax Rates: How to Make Work Pay

Father of the Negative Income Tax

CBPP: Commentary: Arloc Sherman: Policymakers Often Overstate Marginal Tax Rates

I saw a video this afternoon of President Richard Nixon giving a speech to the country outlining his Welfare reform plan from 1969. In it he talked about the dangers of paying people more not to work than people could make in not working. I agree with that which is why I’m not only in favor of increasing the minimum wage to 10-12 dollars and hour and indexing it for inflation. But tying today’s Welfare payments to that of what a full-time minimum wage worker would make  at today’s $7.25 an hour minimum wage.

You tell someone on Welfare that they can not only make more money working than not working whatever the job is and you also tell them even if you do take a short-term low-wage job that pays more than not working and we’ll meaning taxpayers will help you finish your education which includes credits for childcare and finishing their education including vocational training. You now have incentivize them to leave Welfare and reenter or enter the workforce. And for people who simply are on Welfare because they are uneducated and don’t want to work they’ll get kicked off of Welfare for simply being irresponsible, or their time limit will run out on them.

But again work should pay more than not working. So I’m not only about increasing the minimum wage, but I would propose and idea that was proposed by the great economist Milton Friedman in the 1960s. He called it the Negative Income Tax, my version of that would be would instead of cutting people’s Welfare assistance once go to work you let them keep that up to the point that they are no longer collecting or making a poverty income. Whatever money they make from washing their neighbors laundry, or looking after their kids and doing other household chores, or cooking food for people you allow for them to keep all that money plus what they collect from public assistance.

As well as going back to work with an official job again up to the point they are not longer collecting or earning a poverty income. Why, so we encourage people to work and go back to work and finish their education so they can finally get themselves a good job. Instead of saying “for whatever you try to do for yourself and that allows you some type of economic independence, we Uncle Sam or whatever government are going to penalize you in the form of some tax. To encourage you to stay on public assistance and not work at all so you become complete dependents on us the government”.

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About Derik Schneider

Blogger on everything that interests me and that I'm knowledgeable about.
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