negative income tax

noun

Definition of negative income tax 

: a system of federal subsidy payments to families with incomes below a stipulated level

Examples of negative income tax in a Sentence

Recent Examples on the Web

But a good basis is the negative income tax, which subsidises workers below an earnings threshold, while taxing those above it. The Economist, "Capitalism needs a welfare state to survive," 12 July 2018 In more modern times, Milton Friedman, darling of laissez-faire economics, embraced the idea of negative income taxes that put cash in the hands of the poorest people. Peter S. Goodman, New York Times, "Free Cash to Fight Income Inequality? California City Is First in U.S. to Try," 30 May 2018 Economists favour wage subsidies, such as Milton Friedman’s proposed negative income tax, which influenced the design of America’s earned-income tax credit. The Economist, "If wages are to rise, workers need more bargaining power," 31 May 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'negative income tax.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of negative income tax

1950, in the meaning defined above

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The first known use of negative income tax was in 1950

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More Definitions for negative income tax

negative income tax

noun

Financial Definition of negative income tax

What It Is

Negative income tax refers to transfer payments given to families whose reported household income fall below a predetermined amount and qualifies them for a supplemental payment from the government.

How It Works

For families whose household income qualifies as insufficient to fulfill their needs, the government provides a subsidy to help ensure their welfare. This assistance is referred to as a negative income tax because the payment schedule is reversed – the government pays the taxpayer.

[InvestingAnswers Feature: The Most Important Tax Changes to Know Before Filing Your Tax Return]

Why It Matters

It is not uncommon for American families to generate a household income which entitles them to pay little or no tax. In certain cases, many families report a level of income so low that tax law stipulates that the government provide them with financial assistance in order to ensure that their needs are met adequately.

[InvestingAnswers Feature: How to Avoid an IRS Audit]

Source: Investing Answers

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