Income Tax Planning Research Articles

Incentive effects of alternative negative income tax plans

Incentive effects of alternative negative income tax plans

The Effects of Welfare Programs on Experimental Responses

The Graduated Work Incentive Experiment took place in two states, New Jersey and Pennsylvania, in which able-bodied males were eligible for relatively generous welfare programs. The major purpose of this paper is to examine the problems of generalizing from such an experimental setting to the national labor-supply responses that would be generated by a negative income tax that replaced existing welfare programs for families headed by able-bodied males. A second question, closely related but theoretically and empirically more tractable, concerns what the labor-supply effects of the experimental plans would have been had there been no welfare program in New Jersey and Pennsylvania for families headed by able-bodied males. Primarily to shed light on the first question, this paper discusses the second question in some detail.1 In the experiment, families were assigned on a stratified random basis to either one of eight experimental groups or to a control group. Families assigned to the control group were not entitled to benefits from any of the experimental negative income tax plans. Each of the eight experimental groups were eligible for benefits from a different negative income tax program for a period of three

The Uses of Trusts in Income Tax Planning

Evident on both sides of the Tasman has been an increase in the use of trusts for tax planning purposes, brought about by high tax rates in the middle income ranges. This article seeks to answer why the trust is such a successful vehicle for income tax planning, discussing the scheme and principles of the Australian Income Tax Assessment Act 1936.

Negative Income Taxes, Childrens' Allowances and the Family Assistance Plan-Benefits to People with Farm Earnings

Our society has demonstrated distaste for the poverty that exists in our midst and dissatisfaction with present welfare programs. Though numerous plans have been suggested, there is as yet no comprehensive measure to alleviate income problems and replace current welfare programs. Among suggested programs are various negative income tax plans, childrens' allowances and the Family Assistance Plan. The negative tax plans examined include variations from those originally proposed, but will be identified by the name of the original author whose plan they are most like. The Family Assistance Plan was outlined by President Nixon in August 1969.

Social Security and the Paradox of the Welfare State

Many social insurance theoreticians argue that the OASDHI program must be sharply modified and substantially improved to make it function more effectively as an antipoverty tool. This study analyzes empirically the antipoverty effects of the OASDHI program. central thrust of the paper is devoted to the proposition that the OASDHI program is a costly and inefficient technique for reducing the remaining hard-core poverty in the United States. desirability of new alternative public income maintenance programs, such as a negative income tax plan, is also analyzed. Although public income maintenance programs in this country are not as comprehensive as those found in many foreign nations, a reasonably well developed welfare state exists, which treats poverty in a variety of ways. Numerous programs are used to attack poverty, including OASDHI, unemployment insurance, public assistance, war on poverty programs, farm programs, and veterans' benefits. Despite these programs and a pronounced trend toward the welfare state, the paradox of the welfare state is as folGeorge E. Rejda, Ph.D., C.L.U., is Professor of Economics at the University of Nebraska. Dr. Rejda is the recipient of three N.A.I.I. awards for papers published in the Journal and serves currently as Communications Co-Editor of the Journal. He has also studied risk and insurance under a Huebner Foundation Fellowship at the University of Pennsylvania. Dr. Rejda has also served as a staff consultant to President's National Advisory Panel on Insurance in RiotAffected Areas. author wishes to thank Wallace Peterson, Chairman, Department of Economics, University of Nebraska; Charles Lamphear, University of Nebraska; Thomas 0. Nitsch, Creighton University; and Donald Strand, Illinois Wesleyan University for their penetrating and critical comments of an earlier draft of this paper. views expressed in this paper, however, are those solely of the author. This paper was presented at the 1969 Annual Meeting of A.R.I.A. lows: despite numerous public income maintenance programs, the programs benefit least the hard-core poor who need the benefits most.' Because of complex regulations, statutory processes, administrative ruling, and stringent eligibility requirements, millions of poor Americans are denied aid and are excluded from the welfare state. Indeed, the Social Security Administration estimates that only 54 percent of the households counted poor in 1965 received payments from any public program 2 Although many households escape poverty because of public transfer payments, millions remain poor despite the payments. Many social insurance scholars argue that increased emphasis must be placed on the OASDHI program to reduce poverty.3 However, the major thrust of this 1 See Alvin H. Hansen, American Economy (New York: McGraw-Hill Book Company, 1957, pp. 38-39 and 149. 2 Mollie Orshansky, The Shape of Poverty in 1966, Social Security Bulletin, Vol. 31, No. 3 (March, 1968), p. 29. 3 See Wilbur J. Cohen, A Ten-Point Program To Abolish Poverty, Social Security Bulletin, Vol. 31, No. 12 (December, 1968), pp. 3-13; Robert M. Ball, Concluding Remarks, in American System of Social Insurance; Its Philosophy, Impact, And Future Development, ed. by William G. Bowen, Frederick H. Harbison,

A Negative Income Tax Plan for Maintaining Work Incentives

Any subsidy plan for supplementing low incomes tends to reduce labor supply, to the extent leisure is not an inferior good, by raising incomes over what they would be from earnings alone. Under a constant or increasing marginal tax rate subsidy plan, this tendency is reinforced by the fact that as long as a minimum is guaranteed, the marginal income gained from an extra hour's work would be less than that for an hour of earned income. Labor supply would be maintained only by making the marginal income received greater than the amount received from earnings alone. In this article, the author presents a subsidy plan which would tie the tax benefit to the proportion of full schedule worked. He also discusses the shortcomings of the plan and concludes that it is by no means certain that work incentives would be maintained and that the labor supply would not be reduced under such a graduated plan.

Negative Taxes and Monetary Incentives to Work: The Static Theory

The note examines how negative income taxation may influence incentives to work. The model indicating the income-leisure trade-off is used in both graphical and algebraic forms. The analysis indicates that if both income and leisure are normal goods, and if preference patterns are not changed as a result of implementation of a negative income tax plan, utility maximizing individuals will choose to work less in the presence of negative tax payments than in their absence. How much less depends on the level of the income guarantee, the negative (marginal) tax rate, and the shape of the utility function.

The Book Shelf

Abstract ADVANCED ACCOUNTING, Revised Edition, by Arnold W. Johnson, New York: Holt, Rinehart and Winston, Inc., 564 pp., 1960. $8.00. FIBER TO FABRIC, by M. David Potter and Bernard P. Corbman, 3d Edition, New York: Gregg Publishing Division, McGraw-Hill Book Company, Inc., 352 pp., 1959. $4.20. BUSINESS LAW FOR EVERYDAY LIVING, 2d Edition, by S. George Getz, Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 448 pp., 1959. $3.60. BIBLIOGRAPHY OF RESEARCH STUDIES IN STENOGRAPHIC-SECRETARIAL TRAINING AND WORK REPORTED PRIOR TO 1959, compiled by Harves Rahe, Carbondale, Illinois: Southern Illinois University (c/o Harves Rahe). THE CLERICAL PROGRAM IN BUSINESS EDUCATION, Yearbook, Eastern Business Teachers Association and National Business Teachers Association, Harry Huffman, Editor, New York: New York University Bookstore, 18 Washington Place, 470 pp., 1959. $3.75. PHILOSOPHY AND PSYCHOLOGY OF TEACHING TYPEWRITING, by Allien R. Russon and S. J. Wanous, Cincinnati: South-Western Publishing Company, 442 pp., 1960. $4.00. FEDERAL INCOME TAXATION, Tax Principles and Tax Planning, by Robert S. Holzman, New York: The Ronald Press Company, 700 pp., 1960. $8.00. 130 BASIC TYPING JOBS, by Ruth I. Anderson and Leonard J. Porter, Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 61 pp., $1.44. HOW TO USE THE CALCULATOR AND THE COMPTOMETER, 4th Edition, by James R. Meehan, New York: Gregg Publishing Division, McGraw-Hill Book Company, Inc., 144 pp., 1959. $1.76.