Administration of a Negative Income Tax

A recent Comment in this journal1 described the negative income tax (the NIT) as "the boldest and most seriously considered" proposal for restructuring our welfare system. The Comment outlined the defects of the current public assistance programs and proposed a model statute to implement an NIT plan. Most of the debate over the NIT has focused on theoretical economic and welfare goals. Yet many problems with the present welfare system can be attributed to difficulties encountered in administering provisions that are theoretically impeccable. Neither the Journal Comment nor other articles on the NIT' have analyzed these problems and their implications in much detail. This article takes that focus. In a number of areas, the evaluation of these administrative problems leads to different solutions from those appearing in the Journal's Model NIT. At present, the process of selecting those eligible for public assistance and calculating their grants involves welfare workers in administrative activity which has tended to frustrate welfare objectives. The discretion to determine eligibility and the concomitant responsibility impose a tremendous burden on the welfare workers. When combined with the poor's characteristic unfamiliarity with bureaucracies, this discretion often leads to lack of uniformity in the treatment of recipients, arbitrary decisions, and delays in the receipt of benefits. Furthermore, before the amount of assistance is determined, it is usually necessary to determine each beneficiary's needs and available resources. Welfare workers must therefore spend much of their time investigating each beneficiary rather than providing him with counseling services. Not only does investigating waste the welfare workers' training, but it encourages the workers to invade the beneficiary's privacy in order to inspect his belongings and ask questions about his income, net worth, and consumption habits. There is a great danger that an NIT will simply reintroduce these administrative problems. However much it may resemble a tax, an