Scenario 20-5
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income) - $10,000
-Refer to Scenario 20-5. This negative income tax would guarantee what minimum level of income to every family?
A)$5,000
B)$10,000
C)$15,000
D)$25,000

Question

Quizplus · Accepted Answer

The negative income tax formula subtracts $10,000 from one-fourth of a family's income. This means that if a family's income is $40,000 or less, they would receive a negative tax liability, meaning the government would owe them money. For a family with no income, the formula would yield a tax liability of -$10,000, meaning the government would owe them $10,000. Therefore, the minimum level of income guaranteed to every family would be $10,000.

Scenario 20-5 Suppose the Government Implemented a Negative Income Tax and Used