Attempts: Keep the Highest: /2 6. The negative income tax Many economists believ

Question

Attempts: Keep the Highest: /2 6. The negative income tax Many economists believe that a more effective way to supplement the income of the poor is through a negative income tax. Under this scheme, everyone reports his or her income to the government: individuals and families earning a higher income will pay a tax based on that income, while low-Income Individuals and famillies receive a subsidy, or negative tax. Assume that the only qualification required to recelve a tax credit is low Income. Suppose the government uses the following equation to compute a family's tax liability: Taxes Owed (14 of Income)-$6,000 For each of the incomes listed in the following table, determine the tax liability for a family with that income level. (Note: If a family receives a subsidy because its income is too low, be sure to indicate the tax liability as negative.) Income Tax Liability (Dollars per year) (Dollars per year 12,000 24,000 60,000 True or Faise: If a family is currently receiving a tax credit, the credit is reduced by $o.50 for each additional dollar earned until the family reaches an income of $24,000 and the credit becomes $0. O True O False Grade It Now Save &Continue; Continue without saving

Explanation / Answer

The answer is false.

Income Tax Liability = 1/4 x income - 6000 0 =1/4 x 0 - 6000 = -6000 12000 =1/4 x 12000 - 6000 = -3000 24000 =1/4 x 24000 - 6000 = 0 60000 =1/4 x60000 - 6000 = 9000

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