Consider a Canadian family of five two adults and three children (ages 3, 8 and 12). There are two wage earners in the family the husbands income is $50,000 and the wifes income is $2,000. Also assume that only federal personal income taxes are paid (that is, ignore provincial taxes) and use 2017 brackets and rates(15%: up to $45,916; 20.5%: $45,917-$91,831) (a) If the husbands income increases by $6,000, by how much does his tax liability increase? (b) If the husbands increases by $6,000, by how much does his tax liability increase due to the GST credit clawback? The GST credit is clawed back by 5% of the amount by which the family income exceeds $36,429 but under $56,449. (c) Instead if we consider the same income increase as in (a), but look at the payroll taxes (CPP and EI). Given that employees share of CPP is 4.95% and employees share of EI is 1.63%, by how much does his payroll tax liability increase? The individual income limit for CPP is $55,300 and a similar limit for EI is $51,300. (d) Combining (a), (b) and (c), what is his effective MTR? (e) Now consider the Canada Child Benefit (CCB) which is $6,400 per year for a child under 6 and $5,400 for a child between 6 and 17. It is clawed back by 19% if the family income is between $30,000 and $65,000 and by 8% if the family income exceeds $65,000. Calculate annual CCB before and after the husbands $6,000 income increase. By how much does the husbands tax liability increase due to the CCB clawback? Recalculate the husbands MTR from (d) with this measure added. (f) If the husbands income stays at $50,000, but the wifes income increases by $6,000 (to $8,000). How would your answers in (a) (d) change? Remember the personal tax credit and any other applicable exemption(s). What is her MTR if the CCB clawback due to her income increase is added to your calculations? (g) What is the maximum GST credit for this family? Refer to the information on the GST credit provided in (b). (h) The CCB program is estimated to be quite costly but as it stands now its cost is sure to decline overtime. Briefly explain how it is possible for the cost to decline without the federal government reducing the benefits and changing application criteria.