Miguel Horta, “Negative Income Tax in Portugal [Negative Income Tax em Portugal]”

Abtract:”The NIT – Negative Income Tax – is a wealth redistribution system. It works through a tax which reaches for a part of the richest population wealth and distributes it through all others, in an automatic and unconditional fashion. This means no questions asked and no job seeking requirement, but also without introducing a disincentive to work.

This study is a simulation over such a tax in Portugal, in its present day conditions. This tax would be the actual labor tax with some changes. From the simulation with labor tax working this way in a “closed circuit” and a 50% tax on each citizen’s income over 7000 €, it would be possible to guarantee to all adult Portuguese citizens a monthly income of at least 300 €.

Comparing to present day values, this simulated tax represents an increased taxation on the highest incomes. But this tax can be set at any other level, which conditions how much redistribution will occur.

NIT will turn several State social benefits obsolete. Eliminating these programs will relieve public spending by an amount around 70% of what is presently collected with labor tax. Furthermore, the NIT challenges present day public programs for employment and support in unemployment. These programs are based upon the idea that jobs are the source of income for citizens, which means that if those incomes can be guaranteed by other means, then the former can be eliminated, total or partially. This can save public treasury up to more than present day labor tax collection.

The NIT is also associated with solidarity and social cohesion, which naturally will clash with maintaining large incomes and pensions for a minority, as it supports dignified income for all as a human right. This can lead to ceiling caps on pensions, which will liberate even more public funds.

Finally, NIT will reduce poverty and, proportionally, its weight on public funds, in terms of health costs, security costs, among others.

Miguel Horta (2015), “Negative Income Tax in Portugal [Negative Income Tax em Portugal]“, Red Renta Básica, April 24 2015