Yes the point of a negative income tax is to eliminate the more than 100% tax rate someone on welfare is subjected too when they start working for the purpose of incentivizing people to not remain on welfare as on a negative income tax working any hour of work has a marginal benefit & eliminating the gov cost of administrating & distributing welfare benefits.
Sir, does negative income tax really provide incentives? I’m thinking that it also would cause poverty trap because you get more benefits when your income is low.
It provides incentive as long as you do not cross the upper limit. At $5,000 family was earning $8,750 (5,000 income + 3,750 benefit). However with $10k income, total earning would be 12,500 (10k income + 2500 benefit). But if income crosses 20,000 tax will be applied and benefit will be taken away. Sure benefit in terms of earning will be reduced as income increases but total earning will be increased since now family will be making 100% of income instead of that 25% (benefit by govt).
Will you be able to finish A2 macroeconomics within next month?
I don’t think so, but I’m trying to do as much as I can and still keep the quality good.
What happens once you hit the 20,000 mark? Are you then taxed regularly?
Yes the point of a negative income tax is to eliminate the more than 100% tax rate someone on welfare is subjected too when they start working for the purpose of incentivizing people to not remain on welfare as on a negative income tax working any hour of work has a marginal benefit & eliminating the gov cost of administrating & distributing welfare benefits.
Sir, does negative income tax really provide incentives? I’m thinking that it also would cause poverty trap because you get more benefits when your income is low.
It provides incentive as long as you do not cross the upper limit.
At $5,000 family was earning $8,750 (5,000 income + 3,750 benefit). However with $10k income, total earning would be 12,500 (10k income + 2500 benefit). But if income crosses 20,000 tax will be applied and benefit will be taken away.
Sure benefit in terms of earning will be reduced as income increases but total earning will be increased since now family will be making 100% of income instead of that 25% (benefit by govt).
Your net income would still increase if you work
Is this annually or monthly?
20k annually