Nixon's Law -- WAY OFF-TOPIC

[James A. Landau]

In a message dated 11/27/2002 9:08:09 PM Eastern Standard Time,
dcamp911 at juno.com writes:

> the Earned Income Credit...is esentially Nixon's idea of the negative
>  income tax

Thank you for the information, which I was not aware of.

I seriously doubt that Nixon dreamed up a "Negative Income Tax" on his own.
Rather, some economist or writer came up with the idea, and Nixon and/or some
of his advisors thought it was worth implementing.  It is also possible that
whoever promoted the idea of the current Earned Income Credit read the same
paper or whatever that Nixon did, or more likely a more recent rehash of the
same paper.  That is, the most probable thing is that Nixon's NIT and the
current EIC have the same ancestor, and the EIC is a cousin rather than a
child of the NIT.

It would be an interesting exercise for some economic historian to chase down
the origins of the terms "NIT" and "EIC".

There is a corollary to Nixon's Law which goes, "The bottom bracket of the
income tax is part of the welfare system."  That is, when you are designing
any progressive tax, the decision where to place the bottom bracket, in fact
the bottom few brackets, is made not on revenue considerations but by asking
"just what is the government going to be doing with people who have
negligible income?".

This corollary holds true even for a "flat tax".  Consider Mr. X whose earned
income last year was $500.  Are you planning to hit his $500 with the flat
tax, or are you going to write your flat tax law so that it only kicks in at
say $10,000 income?  The first option seems unncessarily cruel.  The second
option, if adopted, has converted your pristine flat tax into a progressive
tax.

This is why I made the statement that a flat tax is in violation of Nixon's
Law.

     - Jim Landau