NEGATIVE TAXATION AND POVERTY

The persistence and scope of poverty and its deleterious effects on society are far greater in the present affluent economy than leaders have anticipated. The evolving control structures have not kept the world's poverty at tolerable levels, and leaders in all countries are seeking more effective means to meet this grave challenge of our age. A negative income tax is one of these mechanisms being studied. In this paper we consider the merits of this plan as implemented in a developing region — the rural areas of the Ozarks — and compare them with the merits of the present public assistance program in the United States. The relevance of the study extends to all affluent societies. SUMMARY Applying the negative income tax to a cross section of households in the rural portion of the Ozarks Region raises questions concerning its overall effectiveness if instituted without modification. The primary issues relate to its distributive effects. Although coverage under the Friedman Negative Tax Plan is much broader than that under current welfare plans, the gap between a target income and disposable income under, the plan is not greatly decreased except at prohibitively high negative tax rates. Many former welfare recipients would receive less total income under the plan. The bulk of the negative tax payments would be received by younger multiple‐member families, and their work incentives might be reduced. Furthermore, costs of a negative tax plan would likely be high.