With a negative income tax that has a $10,000 guaranteed income and a 25 per cent tax rate, a household that has a market income of $14,000 has a total income of

Question

Quizplus · Accepted Answer

The household receives a guaranteed income of $10,000. With a market income of $14,000, they pay 25% tax on this, which is $3,500. So, the total income is $10,000 + $14,000 - $3,500 = $20,500. However, since the question asks for the total income after the negative income tax adjustment, the correct calculation is $10,000 + ($14,000 - $3,500) = $13,000.

With a Negative Income Tax That Has a $10,000 Guaranteed