The Negative Income Tax

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    Since 1913 Americans have paid a fraction of their incomes to the federal government to help pay for government benefits for all citizens and visitors to our country. The need for such an income tax comes from the notion that in a good and decent society the government provides those services and public goods that individuals or private groups cannot or should not provide by themselves. Similarly, state governments also collect their own income taxes.

    At the end of the Nineteenth Century and the beginning of the Twentieth, in what historians call the Progressive Era, government acquired new functions. As a consequence of the Industrial Revolution, which began steaming hard in the latter half of the Nineteenth Century, vast numbers of people fell into poverty and misery on a scale and to a depth never before seen in this country. Huge portions of cities rotted into slums, which became hotbeds of crime and disease. Private charities were overwhelmed by the suffering, so good people began to call for government to help. They were aided in their quest by the stark fact that crime and disease do not remain confined to the slums.

    Police and fire protection were extended into the slums. County and city health departments were established and given the authority to clean up anything they judged to be a hazard to public health. Cities began having their streets swept regularly. The Preamble to the Constitution, especially the phrases "insure domestic Tranquility" and "promote the general Welfare", was conceived by many people as a mandate for government to aid the underprivileged, people who, through no inherent fault of their own, had sunk into poverty and destitution. Government, prodded by unions, required employers to pay their workers a minimum wage, to ensure that people who did actual work for a living could support themselves and their families. Social Security and then Medicare came into being to ensure that people too old to work would not end their lives in squalor.

    Over the course of the Twentieth Century social welfare programs proliferated. We have such programs as food stamps, Section 8 housing, and unemployment insurance, all administered by a bewildering array of government agencies. Nonetheless, poverty continues to exist: the War on Poverty, a 1960's effort to eradicate poverty, failed and it did so and continues to do so for a number of reasons. One problem that has arisen to thwart efforts to end poverty is the discovery by some large corporations that they can underpay their workers, who must then rely on the governmentís social services to survive: in essence, those corporations have become welfare cheats. And the situation is only going to get worse as robots become ever more sophisticated.

    Unfortunately, the Industrial Revolution has nurtured the evolution of an economic system that rewards peopleís worst impulses, especially greed. As a consequence, large corporations are run largely by sociopaths. We need something better and robots will certainly provide it. But we also need to improve our social welfare system in order to get ourselves ready for the full robotification of our economy. The simplest and most substantial improvement is the Negative Income Tax, an old idea whose time has come.

    In concept the Negative Income Tax (NIT) is simple. When a person fills out their Form 1040 they will find an automatic credit large enough to keep them out of poverty. People with progressively larger incomes will pay taxes that will be deducted from the credit, with the taxes so calculated that people who earn more will end up with larger net incomes. At a certain value of income the tax will just cancel the credit and for larger values of income the taxpayer will owe the Internal Revenue Service money. Small credits will be paid to the taxpayer in a lump sum, as they are paid now. Larger credits will be sent in a lump sum to the Social Security Administration, which will pay them out to the taxpayer in monthly installments (as they are currently set up to do).

    Institution of the NIT will enable the government to eliminate certain social welfare programs, such as food stamps and unemployment insurance, without damaging the people who depend on those services. The bureaucracies associated with those programs, bureaucracies required to administer them, will be eliminated, thereby making the government less complex and a little cheaper. Most of the money saved will go toward providing the NIT for the bureaucrats who no longer have jobs.

    One consequence of the NIT will be a reduction in (but not complete elimination of) crime. Certainly few people will be willing to risk going to prison over the few dollars they can steal by sticking up liquor stores if they have a guaranteed income that will keep them out of poverty. Freed from the despair of poverty, fewer people will be likely to use stupefying drugs. Homeless people will be able to find homes, presumably where they can receive at least some treatment for any mental problems that plague them. Our society will become safer, cleaner, and more peaceful.

    We realize the full value of the NIT when the economy becomes fully robotified. As robots fill more and more jobs, displacing human workers, the unemployment rate will increase. As ever more people become unemployed, the basic NIT credit must increase toward an ultimate credit that conforms to a middle-class income. Taxes on businesses and corporations will increase to provide funding, relying on the fact that robots donít get paid, so the businesses will not be damaged by the increase.

    Alternatively, the businesses can diminish the prices on their goods and services. Over time that deflation of prices will increase the effective value of the NIT and passively raise people above the poverty level toward the middle class. As the robotsí productivity grows, that deflation will continue until a plateau is reached.

    The increase in the value of the basic NIT credit ensures that the populace continues to wield enough buying power to keep the economy working smoothly. Because our society has a vested interest in having a well-educated electorate, the basic NIT credit will be augmented by credits based on level of education. That education will include the subjects taught in trade schools: we want a population that could, in an emergency, take over from the robots until the emergency has passed; indeed, a population fully capable of resolving the emergency itself.

    One major obstacle to this project emerges from the fact that some of the first people to be replaced by machines are among the most highly paid - the executives and managers of corporations and large businesses. In the 1990's, computers running simulations of neural nets were able to outperform humans in a task involving judgement. The machines had been trained to process applications for bank loans and were tested on loans that had already been either repaid or defaulted. Now, a quarter century later, computers are even more sophisticated, but corporate executives are not being replaced. The problem is not a technological or financial one; itís a social problem. The people who must be displaced wield enough authority to prevent the displacement. Getting those people out of their offices and beginning the full robotification of the economy will require a social movement that will inspire corporate stockholders to demand computers in place of human executives.

    Instituting the NIT takes us one step on the road to a fully robotified civilization. When full unemployment is achieved, when no people are obliged to work for a living, all people will be free to develop their creativity. They can pursue the arts, the sciences, or any crafts, striving to seek truth, create beauty, and promote goodness throughout the world. They will thus prepare Humanity to take an honored place among the stars.

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