With a negative income tax that has a $10,000 guaranteed minimum income and a 25 per cent tax rate, a household that has earned income of $16,000 has a total income of

Question

Quizplus · Accepted Answer

A negative income tax provides a guaranteed minimum income to households with negative income. In this case, the minimum income is $10,000.

If a household earns $16,000, their taxable income would be ($16,000 - $10,000) = $6,000.

With a 25% tax rate, their tax liability would be ($6,000 x 0.25) = $1,500.

Therefore, their total income would be ($16,000 - $1,500 + $10,000) = $22,000.

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