Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 Income) - 10,000. If a family doesn't earn any income, how does the negative income tax affect it?

Question

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3  Income) - 10,000. If a family doesn't earn any income, how does the negative income tax affect it?

Quizplus · Accepted Answer

If a family doesn't earn any income, then the calculated tax owed would be (1/3 * 0) - 10,000 = -10,000. A negative tax owed means that the family would receive a subsidy of that amount, which in this case is $10,000. Therefore, choice C is the correct answer.

Assume That the Government Proposes a Negative Income Tax That