inal Exam Part 2 Wage Dispersion and Income Equality raded A

inal Exam Part 2: Wage Dispersion and Income Equality raded Assignment | ssignment Due Friday 06.15.18 at 11:00 PM Attempts: Keep the Highest: 12 6. The negative Income tax Aa Aa A negative income tax system provides low-income families with a subsidy (a negative tax). Consider a negative income tax system in which families earning zero income receive a tax credit of $6,000, and the credit is reduced by $0.40 for each additional dollar earned until it becomes $0 at an income of $15,000. The only qualification required to receive this tax credit is an income below $15,000. Calculate the tax credit by using the following formula: Tax Credit $6,000- (Income x 0.40) For example, a family earning an income of 8,000 will receive a credit of $6,000 - ($8,000 x 0.40) $2,800. A family earning an income of $14,000 will receive a credit of $6,0 $400 The marginal tax rate of a family earning an income of $14,0 S2.00 s5,600

Solution

Tax Credit Calculation= $6000-(14000*0.4)=$400

Marginal tax Credit =Change in Tax Credit with respect to change in Income

therefore if we differentiate equation 6000-I*0.4 then marginal rate =40% is correct answer