Welfare recipients are sometimes faced with a withdrawal of welfare benefits and an increase in income tax as their earned income rises. This creates a problem because

Question

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When welfare recipients are faced with a withdrawal of welfare benefits and an increase in income tax as their earned income rises, it creates powerful disincentives to work for low-income individuals. This is because their net income does not increase at the same rate as their earned income due to the loss of welfare benefits and the increase in income tax. As a result, they may choose to work less or not at all, which can have negative consequences for their economic well-being and the economy as a whole.

Welfare Recipients Are Sometimes Faced with a Withdrawal of Welfare