Principles of Economics- Mankiw (5th) 442

Principles of Economics- Mankiw (5th) 442 - 454 PART SIX...

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Unformatted text preview: 454 PART SIX THE ECONOMICS OF LABOR MARKETS Many economists have advocated supplementing the income of the poor us- ing a negative income tax. According to this policy, every family would report its income to the government. High-income families would pay a tax based on their incomes. Low-income families would receive a subsidy. In other words, they would pay a negative tax. For example, suppose the government used the following formula to compute a familys tax liability: Taxes owed (1/3 of income) $10,000. In this case, a family that earned $60,000 would pay $10,000 in taxes, and a family that earned $90,000 would pay $20,000 in taxes. A family that earned $30,000 would owe nothing. And a family that earned $15,000 would owe $5,000. In other words, the government would send this family a check for $5,000. Under a negative income tax, poor families would receive financial assistance without having to demonstrate need. The only qualification required to receive as- sistance would be a low income. Depending on ones point of view, this featuresistance would be a low income....
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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