Scenario 20-4
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 20-4. 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

Quizplus · Accepted Answer

A negative income tax implies that if the calculated tax liability is negative, the government pays 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 is owed.

Scenario 20-4 Suppose the Government Implemented a Negative Income Tax and Used