Everyone needs enough to live on. Many of those who drop out of the job market, or who work in the gig economy, struggle to get by. And too often, help for the poor comes in ways that are cruel, inefficient, paternalistic or complex. In some rich countries, the unemployed face marginal tax rates of over 80% when they begin a job, because of the loss of benefits.
Any welfare reform entails trade-offs between the cost of a scheme and its effects on poverty and incentives to work. No scheme is perfect. But a good basis is the negative income tax, which subsidises workers below an earnings threshold, while taxing those above it. Negative income tax can be combined with a minimum income for everyone. It is a relatively simple, efficient way of targeting poverty while maintaining incentives to work, so long as the tax rate is not too high.
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