Using the same assumption as above about a negative income tax system, if a person who was earning no income takes a job paying an annual salary of R150 000, how much better off will that person be after taking income tax into account?

Question

Quizplus · Accepted Answer

If the person previously had no income, they would have received the full negative income tax benefit amount. Assuming this benefit amount is R112 500 (as calculated in the previous question), their total income after taking the job would be R262 500. With a flat income tax rate of 30%, their income tax amount would be R78 750. Therefore, their net income would be R183 750, which is R112 500 better off than before taking the job.

Using the Same Assumption as Above About a Negative Income