Build better incentives for work over welfare
Governments have long searched for ways to encourage lower-income workers to work and reduce their dependency on state support. Universal income is a popular proposal among academics, but a negative income tax for low-income employees may be a better solution. Similar to how the US earned-income credit functions, a negative income tax would “pay” workers whose incomes are under a certain level. It could effectively target subsidies at people who don’t earn much but are economically active, and it could limit the negative incentives created by welfare systems that provide basic support in exchange for not working. For this idea to be effective and sustainable, however, careful thought must be given to the transition between negative tax rates and positive ones.