Is Britain Moving to a Negative Income Tax?
Click here for all of David Frum’s blogposts from the 2010 Conservative Party conference.
Like school vouchers, the negative income tax was an idea of Milton Friedman's. In lieu of welfare, disability payments, old age pensions, food stamps, housing benefits, etc., Friedman proposed one simple mechanism:
The government would set a minimum number for a basic income: in the money of the time, Friedman proposed $1500 for a family of four. If somebody in that family went out and earned $1, their government check would be reduced, but only by 50 cents. A family that earned $1000 would still receive a check from the government for $1000. A family that earned $1500 would receive a check for $750 more. Only at $3000 in earnings would the government check cease altogether.
The Nixon administration studied a variant of the idea in the late 1960s. The idea was discarded for both policy and political reasons: among other defects, an experiment with the plan suggested it would not encourage work nearly as much as advocates like Friedman had hoped. Daniel Patrick Moynihan got an excellent book out of the affair, with the ultra-engaging title, The Politics of the Guaranteed Annual Income.
But nothing ever dies in public policy! British welfare minister Iain Duncan Smith has been talking up the idea of folding all British cash benefits into a single universal benefit, means-tested to household income, and also tapering away as income from work rises.
In the 1960s, the Nixon people were trying to correct abuses of welfare for the poor. In Britain today, the great concern is the abuses of the disability system. Smith is proposing to move to the universal benefit gradually by 2017. The idea will have to be carefully scrutinized for a new era. But no question: it's a big concept - and one more example of how a moderate style can be linked to a reforming agenda.