Question
The U.S. Earned Income Tax Credit (EITC) has been described as one of the most successful elements of U.S. antipoverty public policy, especially as it
The U.S. Earned Income Tax Credit (EITC) has been described as one of the most successful elements of U.S. antipoverty public policy, especially as it directs benefits towards the poor. Low-wage workers receive additional income (through a tax credit) from the federal government, depending on how much they earn each year. Consider these program features that define an individual worker's eligibility:
i) There is no tax credit if no labour market income is earned.
ii) Phase-in range: the tax credit equals $0.35 per dollar earned, and peaks at $3000, when the worker earns $9000.
iii) Flat range: the tax credit remains at $3000 until the worker earns around $16,500.
iv) Phase-out range: the tax credit is phased out gradually, by $0.15 per dollar earned, until eliminated completely if the worker earns $35,500 or more per year.
Part (a). Assuming the worker does not receive any non-labour market income, graph the budget constraint associated with the EITC for a typical worker earning W per hour.
I am unsure how to graph this, could you please explain?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started