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. Below what level of income would families start to receive a subsidy from this negative income tax?
A)$10,000
B)$25,000
C)$40,000
D)$50,000

Question

Quizplus · Accepted Answer

Families would start to receive a subsidy when their taxes owed become negative. Setting the formula (1/4 of income) - $10,000 < 0, we solve for income: (1/4 of income) < $10,000, which gives income < $40,000.

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