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 USA
Milton Friedman, in his 1962 book, Capitalism and Freedom, advocated a NIT as a replacement for the then current US system of welfare schemes. The idea was picked up by Office for Economic Opportunity under Lyndon Johnson and they set up several pilot programmes in New Jersey. Results from these programmes were used in the design of Nixon?s ill-fated Family Assistance Plan of 1969 ? which would have introduced federally provided income support for all families with children. The New Jersey pilots were followed by further experiments in Seattle and Denver (SIME-DIME) which lasted from 1970-78.
These experiments were not perceived to be a success: the NIT schemes tested were perceived to either be too expensive, to contribute to marital break-ups and to erode work incentives.
The Earned Income Tax Credit, which can be seen as an NIT variant focused solely on working families, was introduced in 1975 and provided the inspiration for the British Working Families Tax Credit.
Canada
The 1960s and 1970s were also the hey-day of NIT proposals in Canada. Several federal and provincial commissions proposed NIT variants: Quebec?s Castonguay-Nepveu Commission in 1971, the Special Senate Committee on Poverty (the Croll report) of 1971, the joint federal-provincial Review of Social Security in 1972-74 and the Royal Commission on the Economic Union and Development Prospects for Canada (the MacDonald commission) of 1985.
One large pilot programme, known as the Canadian Basic Annual Income Experiment, or Mincome Manitoba, was conducted between 1975-78. It found that work incentives were dulled but only slightly, but that there may have been some effect on marital dissolution rates.
UK
In 1970 a free market think-tank, the Institute of Economic Affairs proposed a "reverse income tax" and in 1974 the Conservative Government proposed an NIT variant termed a "Tax credit". This proposal would have abolished tax allowances and replaced them with a weekly tax credit.
An in-work benefit, Family Income Supplement, was introduced in 1971, was replaced by Family Credit in 1988 and in turn was replaced by the Working Families Tax Credit in 1999. The WFTC will be replaced by the Working Tax Credit and the Child Tax Credit in 2003. The Child Tax Credit can be seen as a variant of the NIT focused upon families with children.
Further Reading
Milton Friedman, "The Case For The Negative Income Tax", National Review, 1967 US
Conservative Election manifesto 1974 UK
Guaranteed Annual Income: A Supplementary Paper, (See appendix A for a history of Basic income and NIT schemes and proposals) Canada
Negative Income Tax, Jodie T. Allen, Entry in The Concise Encyclopedia of Economics.
Politics, Economics, and Welfare Reform: The Failure of the Negative Income Tax in Britain and the United States by Leslie Lenkowsky, 1986. Buy It US/Canada UK/Europe US and UK
David Ingles, "Rationalising The Interaction of Tax and Social Security. Part 1: Specific Problem Areas. Part 2: Fundamental Reform Options" Centre for Economic Policy Research Discussion Papers 423 and 424, 2000 Australia
Extract from The Economics of Inequality, A.B.Atkinson, Oxford University Press (1975), pp 227-236 UK
Whatever happened to Canada's guaranteed income project? Derek Hum and Wayne Simpson, University of Manitoba. Canada
Work Incentives and Income Guarantees: The New Jersey Negative Income Tax Experiment, Joseph A. Pechman, and Michael P. Timpane, 1975. Buy It US/Canada UK/Europe US
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