454PART SIXTHE ECONOMICS OF LABOR MARKETSMany economists have advocated supplementing the income of the poor us-ing a negative income tax.According to this policy, every family would report itsincome to the government. High-income families would pay a tax based on theirincomes. Low-income families would receive a subsidy. In other words, theywould “pay” a “negative tax.”For example, suppose the government used the following formula to computea family’s 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 familythat earned $90,000 would pay $20,000 in taxes. A family that earned $30,000would owe nothing. And a family that earned $15,000 would “owe” $5,000. Inother words, the government would send this family a check for $5,000.Under a negative income tax, poor families would receive financial assistancewithout having to demonstrate need. The only qualification required to receive as-sistance would be a low income. Depending on one’s point of view, this feature
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Taxation in the United States, negative income tax