A Negative Income Tax (NIT) for supplementing low-income earners, alleviating poverty and redistributing income
Is Malaysia ready for such reform?
With the 2025 budget about to be presented in only a few hours, maybe it’s a good opportunity to present a concept that will assist low-income earners, help alleviate poverty, and re-distribute income away from high income earners towards low-income earners.
From my memory, this concept was refined by Paul Samuelson (I still remember his great economics text), which drew upon Pareto’s work. Samuelson showed income and tax from a market perspective, where maximum wellbeing would be achieved if tax was also turned into a welfare function. The monetary economist Milton Friedman picked up on this approach as a system to alleviate poverty.
A Negative Income Tax (NIT) system, as it’s become known turns tax into subsidies beyond a certain income level. Earners below a set income level would receive money, rather than pay tax. Such a system would allow all other subsidy apparatus to be disbanded (petrol and food subsidies).
Such a system would be fair upon a completely needs basis, and dispense with all the paperwork required for selective subsidy systems the government is experimenting with at the moment. They key is selecting the minimum wage tiers that would optimise incomes of the B20. It would be a very efficient social welfare system. Many economies like Australia are locked into a welfare system that becomes a welfare trap, where people are hesitant to leave.
Thaksinomics is back
Malaysia would not be the only country in ASEAN to consider NIT. The Thai cabinet is now looking at Negative Income Tax (NIT), with a view to adopting it in the future. The Thais are considering the use of digital platform to deliver the income to families below the income threshold. The system would be administrated through the Thai Revenue Department. One of the Thai premises is that individuals registering with the Thai Revenue Department would eventually widen the Thai income tax base, especially within the informal economy.
Just some ‘food for thought’ on budget day.
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One of the most important thing that Malaysia need is righteousness. We have plenty of religious hypocrisy. You know people say an empty vessel makes the most noise. Those who makes the most noise about religion also rule the country. But they accused others of stepping on their head. Nevermind they control the police and arm forces and practically everything else even the private companies own by others have to hire at least eighty percent of their stuff their kind. Poverty is define by skin color. While the stupid think it's goody good they fail to realize that what they think was meant for them goes to the filthy rich of the same skin color. And we know how long it has been. So no formula even dose with snake oil is going to work until we can call a spade a spade. Let's define poverty righteously. GOD forbid anything else.