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Re: Sabhlok on the Negative Income Tax



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At 01:03 PM 6/9/00 -0700, Prof Subroto Roy wrote:

>-- Yes, but Dr Sabhlok needs to explain how he foresees explaining to e.g.
Parliament, how this might be implemented, i.e. how a negative income tax
can replace all indirect subsidies presently received... people may agree
about the textbook logic but no one is going to agree to give up indirect
subsidies individually received for a national system which may be both
more efficient and equitable.  

*** My answer: I think one can implement a reasonably effective NIT
programme. I am working out possible details on the basis of some
[official] discussions. I will of course share these details for further
debate to ensure that a wider criticism is possible of this concept.

That it can be successfully implemented, or it is some sort of an optimal
solution to the contest between liberty and equality does not mean the
Parliament or anyone else will buy it. You are asking me to in some way
certify that the politicians will buy this. That is the same thing Prof.
Nirvikar Singh asked. I can't. Vested interests, as we all know. 

But so long as we all admit that "people may agree about the textbook
logic" [of NIT] we are moving along pretty well for a national debate on
system reform. IPI is concerned with ideal policies. I am happy if we have
an ideal 'manifesto' in place. First best solutions only.

> {Prof Roy:} Even advanced economies like the United States have not
really got a negative income tax, though they do have e.g. food stamps.  

*** I do not support food stamps for various reasons, both theoretical and
as an administrator. I am sure you will agree it is a **very** poor
substitute for NIT. 

>I am however extremely doubtful of any progressive economic thinking
coming out of the present Government or its Opposition.  

*** On IPI one does not have to bother too much about current events or
people; only policies. Nevertheless, I have a much higher regard for the
sagacity of many of our political leaders. The problem is that so far the
NIT case has not been documented in government. One has to make a clear
case and then support is likely to come. In fact, I discussed NIT with many
senior [concerned] officials in Delhi this time and I believe that it (or
its weaker versions where it is not a tax but supplement) has struck a
chord with at least some of them.

I am working on much more data now, also, collected from the Planning Comm.
and Finance Ministry. Kindly await an updated note within a week.

SS.

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