Should we prefer a low earners’ overcharge or a partial basic income?

We would be well advised not to rush too quickly to a system in which the effective marginal tax rate on the lowest incomes would not be higher than those higher up. There are two ways of accommodating this advice in a basic income proposal. One consists in correcting a linear, or even a progressive system with an “overcharge” for the net beneficiaries of the basic income, as suggested for example by James Meade (1989). [Fig. 6] Another is a “partial basic income”, as proposed for example by the Dutch Scientific Council for Government Policy (WRR 1985) and explored at length since, both in the Netherlands (Dekkers & Noteboom 1988, de Beer 1993, van der Veen & Pels eds. 1995, Groot 1999) and in other European countries (Atkinson 1989, Parker ed. 1991, Lahtinen 1992, Brittan 1995, Gilain & Van Parijs 1995, Clark & Healy 1997). A partial basic income would fall short of the level of income currently guaranteed to a single person, but it may approach or even exceed half the level currently guaranteed to a couple, and it would go hand in hand with the maintenance of a residual means-tested guaranteed income scheme. It would therefore imply the preservation of a 100% effective tax rate on a shrunk lower range. [Fig. 7] Under either variant, the earlier paradox becomes sharper: it is not only better for the poor that the rich should receive the same as the poor. It is also better for them that they should be taxed more than the rich.