NIT-Type Basic Income

Jong-sung You (), Nam Hoon Kang () and Seungju Lee ()
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Jong-sung You: Yonsei University, Korea Inequality Research Lab
Nam Hoon Kang: Hanshin University
Seungju Lee: Daegu University, Department of Social Welfare

Chapter 2 in UBI from Idea to Reality, 2026, pp 33-56 from Palgrave Macmillan

Abstract: Abstract This chapter critically evaluates the effectiveness and efficiency of an NIT-type basic income compared to traditional social assistance models. The authors argue that existing means-tested programs, particularly fixed-amount and gap-filling assistance, inherently generate prohibitive Participation Tax Rates (PTR) and Effective Marginal Tax Rates (EMTR). These structural flaws create “welfare traps” and deadweight losses that undermine labor supply and economic growth. By contrast, the authors demonstrate theoretically that an NIT-type basic income can restore labor incentives and eliminate the income reversals often found in current welfare systems. The analysis highlights the redistributive mechanics of a flat-tax-based basic income, showing that a proportional nominal tax rate yields a highly progressive effective tax rate structure. Acknowledging the fiscal infeasibility of a “full” basic income, the authors propose a “fiscally neutral partial basic income”. This approach partially replaces existing social assistance to establish a firm income floor without imposing excessive tax burdens. Furthermore, the authors strongly advocate for an individual-based NIT-type basic income to eliminate marriage penalties and encourage household formation. Finally, the proposal incorporates age-differentiated payments—offering higher guaranteed incomes for children and the elderly—to ensure intergenerational equity.

Keywords: Means-tested programs; Social assistance; Effective Tax Rates / ETR; Participation Tax Rates / PTR; Effective Marginal Tax Rates / EMTR; Welfare traps; Deadweight losses; Labor incentives; Income reversals; Pareto superiority; Flat-tax-based basic income; Fiscally neutral partial basic income; Income floor; Individual-based NIT; Age-differentiated payments (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:pal:etbchp:978-3-032-26200-4_2

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DOI: 10.1007/978-3-032-26200-4_2

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