Abstract:

The main objective of this paper is to propose a financially viable alternative to the current Spanish social protection system: a Negative Income Tax (NIT) that unifies in a single mechanism the public benefits system and the income tax. The main features of the NIT are analysed and several NIT proposals for Spain are simulated using the Encuesta de Condiciones de Vida (Living Conditions Survey). These proposals are distinguished by the fact that they do not imply an additional cost in the tax-benefit system. The results of our simulations indicate a radical improvement in poverty and inequality indicators, especially extreme poverty, and also a redistribution of income from the elderly to families with children.

Reference:

Granell, R.; Fuenmayor, A. (2019): Implementing a Negative Income Tax. Net Cost, Poverty and Inequality Effects, Hacienda Pública Española / Review of Public Economics, 228(1), pp. 83-108. DOI: https://doi.org/10.7866/hpe-rpe.19.1.4