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Re: Sabhlok on the Negative Income Tax



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"Dr. Subroto Roy" wrote:

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

the US has direct monetary public assistance programs
[a.k.a. 'welfare'] paid solely on the basis of income level.

additionally, there is the 'earned income tax credit' which
is a direct payment by the govt in response to wage earners
filing tax returns showing income below a certain amount.


That said, imo there are cases where indirect
subsidies are most efficient.

The cases for indirect subsidies, imo, are those involving the
use of large capital investments: It may be inefficient to
disperse the subsidy capital directly to the intended
beneficiaries and waiting for the agents that will aggregate
the capital to spring up in a timely way.

Given that direct assistance to the poor is nonexistant
in India, I believe that Sanjeev's proposal deserves
serious consideration. I believe that the problems of
leakage are considerable but need to be examined in
the context of leakage/waste in direct subsidy programs.

Thinking aloud, it is conceivable that if direct subsidies
are implemented, when recipients go to the bank to
collect their distribution, a group of gangsters hang out
at the bank doors and extract a 'tax' from each subsidy
recipient. [I recall reading that something similar used
to happen in Bihar's coal mines when workers collected
their pay]. On the other hand, this kind of theft is much
more visible than waste and embezzlement of indirect
subsidies, holding out greater possibility of popular
mobilization for measures against such theft.
I also suggest that if politicians derive power and
benefits from the current subsidy structure, e.g.
through the ability to appoint cronies to sinecures and
direct monetary kickbacks, they will resist any change to
the current regime. However raising the possibility of
direct subsidies is the first step to the possibility of
their introduction and that they hold promise in alleviating
poverty.



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