A 10% value-added tax coupled with partial UBI would reduce inequality, raising the after-tax income of the bottom three income quintiles.

The UBI amount is based on family size and composition. It would be provided quarterly to each family, for an annual reimbursement equal to two times the poverty line, multiplied by the VAT rate. For example, with a 10% VAT, a family of four would receive $5,200 per year. On these scheme, after-tax income would rise by 16.9% for the lowest quintile, 4.6% for the second, remain virtually unchanged or the middle (0.1%), reduce the fourth quintile by 2.4%, and the top quintile by 4.7%.

empirical


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