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In the United States, the Earned Income Tax Credit ( EITC ) is a tax credit that supplements the earnings of low - income workers
In the United States, the Earned Income Tax Credit EITC is a tax credit that supplements the earnings of lowincome workers with children. For a qualifying single individual with one child, the structure of the EITC in the year is as follows.
A credit on each dollar of income earned up to a maximum credit of $
The maximum credit is reduced by for each dollar earned above $
Based on these parameters, please answer the following.
a What is the "phase in region for the EITC? In other words, what is the income range over which the earnings of this individual is subsidized? You may answer using a graph, an equation or using words. If you choose to characterize the phasein region using words, then your answer must be very precise. marks
b What is the "break even" level of earnings above which a single worker no longer receives an EITC subsidy? marks
c Based on your answers to parts a and b and the parameters of the EITC, draw a figure showing the budget constraint of a single worker under the EITC. Your figure should clearly label the axis, axis and the income cutoffs and marks
d In one paragraph or less, explain how the EITC affects the incentive to work for i individuals with earnings below ii individuals with earnings between and iii individuals with earnings between and and iv individuals with earnings above marks
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