An advantage of a negative income tax is _____.

Question

Quizplus · Accepted Answer

A negative income tax has the advantage of being able to replace many existing transfer programs, which can simplify and streamline the process of providing assistance to those in need. This can save administrative costs and minimize bureaucratic inefficiencies. However, options A, C, and D are incorrect. Option A is incorrect because a negative income tax is not necessarily more paternalistic than in-kind transfer payments. Option C is incorrect because the incentive to substitute into leisure may still exist somewhat, although it may not be as strong as with other types of transfer payments. Option D is incorrect because a negative income tax, like any tax, will have some excess burden, although it may be relatively small compared to other forms of taxation.

An Advantage of a Negative Income Tax Is _____