Apart from the fact that the government might need to recalculate how much funding is needed for a negative income tax system, there is also the question of whether the current Public Assistance Act is too strict in recognizing low-income households, or if there is a problem in the design of the negative income tax system. In any case, the definition of the poverty level should be the same in the negative income tax system as in the Public Assistance Act.
In the past few hundred years, public finance experts have pleaded for a flat tax in order to make governing less complicated and to lower taxes. Friedman hoped the negative income tax system could be combined with the social assistance system. Over 40 years have since gone by, and this ideal has still not been realized. Opinions vary on whether a negative income tax system would successfully give low-income workers more incentive to work. But the world can only improve if there is change. Taiwan’s income tax system and social relief system need to be reformed, but to avoid needless overlap, any reform should be well thought out.
Chou Li-fang is professor and dean of the Department of Public Finance at National Chengchi University.
TRANSLATED BY ANNA STIGGELBOUT
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