RESULTS OF NEGATIVE INCOME TAX EXPERIMENTS
These massive social experiments were funded by grants from the federal government. They were conducted initially in New Jersey, in rural areas ( Iowa, North Carolina), and in Gary, Indiana. The final and largest studies were the Seattle and Denver Income Maintenance Experiments (SIME/DIME).
Support rates in the New Jersey study were 75, 100, and 125 percent of the poverty level, and tax rates were 30, 50, and 70 percent. The SIME/DIME experiment had support levels from 95 to 140 percent of the poverty level, and tax rates from 50 to 80 percent (the latter rate included a declining rate as income rose).
SIME/DIME imputed a 5.75 percent return on some components of net worth (stocks, savings accounts, equity in owner-occupied housing and other real property) as countable income. Benefits were available only to households (more than one person), not to single individuals (except where divorce occurred during the experiment, in which case benefits continued to single individuals, but benefits were limited to $1,000 per year).
It was assumed that only families of these types were likely to be included in any permanent income maintenance program for political reasons. 28
Disabled were omitted, because their labor supply responses were expected to be different and would confound the results. The age limitation was between eighteen and fifty-eight.
Initial reports of the results of this study were quite sanguine.
What we found was that people forecasting a negative income tax would be a disaster apparently are wrong. . . . We're not saying the payments cause people to run out and get jobs. It's just that if the country wants to come up with legislation to increase people's income--to bring them up to a subsistence level --they're not necessarily going to become any less diligent than the rest of society. . . [A] reduction of only 12 percent suggests that the introduction of a national negative income tax program will not give rise to a tidal wave of voluntary idleness. 29