Is Basic Income cheaper than negative income tax?

How much of a real difference there is between the a basic income and a negative income tax depends on further specification of administrative procedures. It shrinks, for example, if taxes are levied at source on a pay-as-you-earn basis (rather than only after tax returns have been processed), or if tax liabilities are assessed on a weekly or monthly, rather than an annual basis, or if everyone is entitled, under a NIT scheme, to an advance payment of the presumptive tax credit (subject to subsequent correction), or if everyone is entitled, under a BI scheme, to get the BI as a tax discount rather than in cash. But even in the closest variant, there remains a difference between a system that operates, by default, “ex ante”, and one that operates, by default, “ex post”. Any remaining difference would count as an advantage for the basic income variant with respect with the first, uncertainty-linked dimension of the unemployment trap. Yet, with a rudimentary benefit payment technology (coins carried by the postman!) or with a tax collection administration plagued with corruption or inefficiency, the case for the NIT variant, which does away with the back-and-forth of tax money, may be overwhelming. In an era of technological transfers and with a reasonably well run tax administration, on the other hand, the bulk of the administrative cost associated with an effective guaranteed minimum income scheme is the cost of information and control: the expenditure needed to inform all potential beneficiaries about what their entitlements are and to check whether those applying meet the eligibility conditions. In these respects, a universal system is bound to perform better than a means-tested one. As automaticity and reliability increase on both the payment and the collection side, it is therefore, in this administrative sense, increasingly likely to be the cheaper of the two, for a given degree of effectiveness at reaching all the poor. In is for this sort of reason that James Tobin (1997), for example, preferred a universal “demogrant” to its negative-income-tax variant.