What is the relationship between net taxes, transfers, and income?
A) Net taxes increase with income but transfers decrease with income.
B) Net taxes increase with income and transfers increase with income.
C) Net taxes decrease with income and transfers decrease with income.
D) Net taxes decrease with income but transfers are not related to income.
E) Neither net taxes nor transfers are related to income.

Question

Quizplus · Accepted Answer

Net taxes refer to the taxes paid by an individual or household after accounting for any government transfers or subsidies received. As income increases, an individual's tax burden also increases, hence net taxes increase with income. On the other hand, government transfers such as welfare, food stamps, or social security payments are usually means-tested, meaning they decrease with income. Therefore, transfers decrease with income while net taxes increase with income.

What Is the Relationship Between Net Taxes, Transfers, and Income