Scenario 20-2
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) - $20,000
-Refer to Scenario 20-2.A family earning $60,000 before taxes would have how much after-tax income?

Question

Quizplus · Accepted Answer

The tax liability is calculated as (1/4 of $60,000) - $20,000 = $15,000 - $20,000 = -$5,000. Since the tax liability is negative, the family receives $5,000, making their after-tax income $60,000 + $5,000 = $65,000.

Scenario 20-2 Suppose the Government Implemented a Negative Income Tax and Used