In economics, a negative income tax (NIT) is a progressive income tax system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government.
Such a system has been discussed by economists but never fully implemented. It was described by British politician Juliet Rhys-Williams in the 1940s and later by United States free-market economist Milton Friedman.
Negative income taxes can implement a basic income or supplement a guaranteed minimum income system.
In a negative income tax system, people earning a certain income level would owe no taxes; those earning more than that would pay a proportion of their income above that level; and those below that level would receive a payment of a proportion of their shortfall, which is the amount their income falls below that level.