· for workers with sub-subsistence productivity, the NIT indeed provides additional revenue.
The second effect cannot properly be regarded as a positive effect of a NIT. Only the last effect is the NIT proper. However, proponents of the NIT often include the second group when they claim good results. In the current situation of mass unemployment, the employment effect will also be largest for the second group, so the effects of the NIT are grossly overstated. You may be familiar with the joke of the mouse and the elephant walking on a bridge, and the mouse proclaiming: “We make quite a lot of noise together, don’t we ?”
It must be noted that proposals on the NIT generally state huge sums of money. The NIT is very ‘expensive’ since all spouses would apply, causing the need for more changes in the tax code. [97]
The NIT complexities, and huge sums, also obscure the fact that abolishing the Tax Void would be for free. Proponents of the NIT thus can be compared to people at Amsterdam Schiphol airport wanting to go to Washington, and waiting at the ticket booth till they have enough money to buy the expensive ticket, while they overlook that, due to circumstances, the plane to New York flies for free.
The concept of a NIT, intended to do good, generally seems to cause people to do a lot of harm. The Central Planning Bureau (1992a&b) study assumed the gradual introduction of a NIT in the course of 25 years, keeping subsistence fixed at a constant inflation adjusted value of 1990, and the NIT fully introduced at that value in 2015. This scenario thus has the drawbacks of (a) achieving full employment only in 2015, (b) not indexing subsistence to general welfare.
It may well be that the Ministry of Finance is less equipped to deal with employment policy including the measurement of potential productivity. It would be better to quickly abolish the Tax Void, index subsistence properly, and restore the normal processes of social security and workfare to assist the sub-subsistence group.
The following equations clarify the relation between the NIT, exemption and subsistence. With market income y, the Bentham tax function Bentham[y], allowance A from the state, then net income and implied tax are:
net[y] = y - Bentham[y] + A = y - r (y - x) + A
implied tax[y] = y - net[y] = r (y - x) - A = r (y - (x + A/r)) = r (y - x
