Scenario 20-8
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) - $14,000

-Refer to Scenario 20-8. The government does not have to pay a subsidy to any family through this negative income tax if the family with the lowest income earns $50,000.

Question

Scenario 20-8
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) - $14,000
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-Refer to Scenario 20-8. The government does not have to pay a subsidy to any family through this negative income tax if the family with the lowest income earns $50,000.

Quizplus · Accepted Answer

A negative income tax implies that if the calculated tax liability is negative, the government pays the difference as a subsidy. For a family earning $50,000, the tax liability would be (1/4 * $50,000) - $14,000 = $12,500 - $14,000 = -$1,500, indicating a subsidy of $1,500.

Scenario 20-8 Suppose the Government Implemented a Negative Income Tax and Used