Many economists believe that a more effective way to supplement the income of the poor is through a negative income tax. Under this scheme, everyone reports his or her income to the government; individuals and families earning a higher income will pay a tax based on that income, while low-income individuals and families receive a subsidy, or negative tax. Assume that the only qualification required to receive a tax credit is low income.

Suppose the government uses the following equation to compute a family's tax liability:

TaxesOwed=(1/2ofIncome)$7,000

For each of the incomes listed in the following table, determine the tax liability for a family with that income level. (Note: If a family receives a subsidy because its income is too low, be sure to indicate the tax liability as negative.)

IncomeTax Liability

(Dollars per year) (Dollars per year)

0

7,000

14,000

30,000

True or False: Any family with an annual income less than $14,000 will receive a subsidy.

True

False