Assume a negative income tax that is structured according to the formula T = -$5,000 + 0.5Y,where T = tax liability and Y = earned income.The break-even income,when the family neither receives a tax payment nor pays any income tax,is

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At the break-even point, the tax liability (T) is zero. Setting T = 0 in the formula gives 0 = -$5,000 + 0.5Y. Solving for Y, we get Y = $10,000. This is the income level at which a family neither owes taxes nor receives a subsidy.

Assume a Negative Income Tax That Is Structured According to the Formula