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 $90,000 before taxes would have how much after-tax income?

Question

Quizplus · Accepted Answer

For a family earning $90,000 before taxes, the tax liability can be calculated as follows:

Taxes owed = (1/4 * $90,000) - $20,000
Taxes owed = $22,500

Therefore, the after-tax income for this family would be:

After-tax income = $90,000 - $22,500
After-tax income = $67,500

Therefore, the best choice is C, $87,500, as it is not the after-tax income of the family but the amount of taxes they owe.

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