Which of the following statements about a negative income tax system are true?
(i) it would eliminate tax progressivity
(ii) it would collect more tax from high-income households
(iii) it would give transfers to low-income households

Question

Quizplus · Accepted Answer

A negative income tax system would provide transfers to low-income households, which is statement (iii). It would also collect more tax from high-income households, as they would not receive the transfers provided to low-income households, which is statement (ii). Statement (i) is false as a negative income tax system would still maintain progressivity by collecting more tax from high-income households. Therefore, the correct answer is (D) (ii) and (iii).

Which of the Following Statements About a Negative Income Tax