With a negative income tax, if people get at least $10,000 and the breakeven point is $50,000, what is the tax rate?

Question

Quizplus · Accepted Answer

The tax rate is the percentage of income that is taxed. In this case, the breakeven point is $50,000, which means that people who earn less than $50,000 will receive a negative income tax, while people who earn more than $50,000 will pay a positive income tax. The amount of the negative income tax is equal to the difference between the breakeven point and the person's income. In this case, the difference between the breakeven point and the person's income is $10,000, which means that the person will receive a negative income tax of $10,000. The tax rate is the percentage of income that is taxed, so the tax rate in this case is 20%.

With a Negative Income Tax, If People Get at Least