Scenario 20-2
Suppose that a society is made up of five families whose incomes are as follows:

$120,000; $90,000; $30,000; $30,000; and $18,000.

The federal government is considering two potential income tax plans:

Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.

Plan B is a two-tiered plan where families earning less than $35,000 pay no income tax and families earning more than $35,000 pay 10% of their income in taxes. The income tax revenue collected from those families earning over $35,000 is then redistributed equally to those families earning less than $35,000.

-Refer to Scenario 20-2. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of libertarianism prefer?

Question

Scenario 20-2
Suppose that a society is made up of five families whose incomes are as follows:
​
$120,000; $90,000; $30,000; $30,000; and $18,000.
​
The federal government is considering two potential income tax plans:
​
Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.
​
Plan B is a two-tiered plan where families earning less than $35,000 pay no income tax and families earning more than $35,000 pay 10% of their income in taxes. The income tax revenue collected from those families earning over $35,000 is then redistributed equally to those families earning less than $35,000.
​
-Refer to Scenario 20-2. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of libertarianism prefer?

Quizplus · Accepted Answer

Libertarianism emphasizes minimal state intervention in the lives of individuals and is against forcible income redistribution, which both Plan A and Plan B involve.

Scenario 20-2 Suppose That a Society Is Made Up of Five Families