Taxes: Being Positive About the Negative

To many Americans, the idea of a guaranteed income smacks suspiciously of a dole to people who refuse to get a job. Others argue that this would not be the case with a guaranteed-income scheme called the "negative income tax." Intended to preserve at least some incentive to work, the proposal has at tracted remarkably disparate support —ranging from University of Chicago Economist Milton Friedman, a 1964 adviser to Barry Goldwater, to Yale's James Tobin, a former economic adviser to President Kennedy. Last week the idea got a big boost from inside the business community when Ford Motor Co. President Arjay Miller endorsed it as a key step toward "the elimination of poverty."

Basic Allowance. Speaking at a National Industrial Conference Board meeting in Manhattan, Miller assailed the "unsatisfactory progress" of the nation's existing welfare system by pointing out that there are some 30 million low-income Americans, of whom fewer than 8,000,000 receive public assistance. Present programs, said Miller, "are failing to reach many of those who need help most. Some of the poor now receive help from two or more programs, while others in desperate need receive nothing at all."

Like other supporting proposals for a negative income tax, Miller envisions using tax revenues to assure impoverished families of part of the amount by which their income falls below a certain level. Under one proposal, a family paying no income tax (for example, a family of four with income of less than $3,000) would receive payments equal to the exemptions and deductions it would be credited with if it were in a tax-paying bracket. As Miller sees it, a householder with no income whatsoever "would receive a basic allowance related to the size and composition of the family unit."

The Ford president was careful to avoid the pitfall of incentive-destroying programs in which "every dollar increase in earned income is entirely off set by withdrawal of a dollar in welfare payments." Instead, he said, "when a member of a family began to earn income, the basic allowance would automatically be reduced by an offsetting tax, but not by a corresponding amount. A family with a member at work would always be better off than a family with out anyone at work."

Rag Bag. Last week's speech positions Miller, a moderate Republican, alongside such liberals as Economist John Kenneth Galbraith and Civil Rights Leader Martin Luther King, both of whom advocate some sort of guaranteed annual income. In fact, what ideological difference there is on the guaranteed-income issue is largely a matter of emphasis, with conservative supporters apt to put more accent on incentives—and to link their proposals to reductions in what Economist Friedman decries as a "rag bag" of Democrat-administered welfare programs.