Assertion (A): A Negative Income Tax (NIT) scheme can simultaneously achieve vertical equity and avoid the poverty trap inherent in categorical means-tested transfers. Reason (R): In a NIT, the benefit reduction rate (implicit marginal tax rate) is set below 100%, so recipients always retain a positive financial gain from earning additional income, thereby preserving work incentives. Select the correct code:

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Economics · Social Welfare and Taxation

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Both A and R are true, and R is the correct explanation of A

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