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The Case for Negative Income Tax with Flat Tax in Europe: An Empirical Optimal Taxation Exercise

A microeconometric model of labor supply for a sample of Southern, Central, and Northern European countries is used to compare the welfare function effects of various forms of basic income, negative incomes taxes, and conditional welfare programs. A general negative income tax is optimal in terms of welfare maximization, followed by unconditional basic income, and lastly, in-work-benefit policies as is the norm in the US today.

2018

Academic Paper

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For a number of European countries, a micro-econometric model finds that a negative income tax financed via a flat-tax maximizes social welfare. In the case of several EU countries, both UBI and NIT outperform existing conditional welfare measures in terms of maximizing a social welfare function.
Ugo Colombino Nizamul Islam
Basic Income
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