Scenario 20-3
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) − $16,000
-Refer to Scenario 20-3. Below what level of income would families start to receive a subsidy from this negative income tax?

Question

Quizplus · Accepted Answer

Families would start to receive a subsidy when the formula results in a negative tax liability. Setting the tax owed to zero and solving for income: 0 = (1/4 * income) - $16,000, leads to income = $64,000. Below this level, the tax owed would be negative, meaning families receive a subsidy.

Scenario 20-3 Suppose the Government Implemented a Negative Income Tax and Used