Suppose that a negative income tax was created that set a minimum income for a family of $5,000 per year and had a marginal tax rate of 33 percent. What is the break-even level of income? If a person earned $5,000 . what would the after-tax income level be? If the earnings were $10,000 . what would the after-tax income be?
The break-even level of income is $15,000 . At that income the tax is $5,000 (exactly equal to the guarantee), and the payment by government to the family ceases. If the family earned $5,000 . one-third of $5,000 would be deducted from the guarantee, and the family would have an income of $8,333.33 . If the family earned $10,000 . one-third of $10,000 would be deducted from the guarantee, and the family would have an income of $11,666.67.
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If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is
A) a necessity. B) an income elastic good. C) an inferior good. D) a luxury good.
If the prevailing price of shirts is $10 and at this price demanders demand 100 shirts while suppliers are willing to supply 110 shirts, there is a(n)
a. shortage at the $10 price. b. surplus at the $10 price. c. equilibrium in this market. d. shortage if price were to rise above $10.