Scenario 20-4
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/5 of income) - $15,000
-Refer to Scenario 20-4. A family earning $50,000 before taxes would have how much after-tax income?
A)-$5,000
B)$40,000
C)$45,000
D)$55,000

Question

Quizplus · Accepted Answer

To calculate the after-tax income: Taxes owed = (1/5 of $50,000) - $15,000 = $10,000 - $15,000 = -$5,000. Since the tax is negative, the family receives $5,000, making their after-tax income $50,000 + $5,000 = $55,000.

Scenario 20-4 Suppose the Government Implemented a Negative Income Tax and Used