Scenario 20-7
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/6 of income) - $24,000
-Refer to Scenario 20-7. A family earning $120,000 before taxes would have how much after-tax income?

Question

Quizplus · Accepted Answer

The tax liability is calculated as (1/6 of $120,000) - $24,000 = $20,000 - $24,000 = -$4,000. Since the tax is negative, the family receives $4,000, making their after-tax income $120,000 + $4,000 = $124,000.

Scenario 20-7 Suppose the Government Implemented a Negative Income Tax and Used