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

Quizplus · Accepted Answer

With an income of $0, the taxes owed would be calculated as (1/3 × $0) - $10,000 = -$10,000. This means the family would receive a subsidy of $10,000, as negative taxes translate to a subsidy in a negative income tax system.

Assume That the Government Proposes a Negative Income Tax That