{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Principles of Economics- Mankiw (5th) 442

Principles of Economics- Mankiw (5th) 442 - 454 PA R T S I...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
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 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 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 one’s point of view, this feature
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Ask a homework question - tutors are online