Question
6. A program proposed for a negative income tax has an aim to provide an income guarantee for each person, regardless of his or her
6. A program proposed for a negative income tax has an aim to provide an income guarantee for each person, regardless of his or her age or status, of $1,600 per year. Thus, a four-member family would have an income guarantee of $6,400 per year. The transfers under the program will decline at a rate of 25 percent as earned income increases. Calculate the break-even level of income for a four-member family. If all families with income above the break-even level pay a flat-rate 25 percent tax on their earnings, plot disposable income as a function of earned income. (25 points)
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