Question
In: Economics
The tax system in Taxilvania includes a negative income tax. For all incomes below $10,000, individuals...
The tax system in Taxilvania includes a negative income tax. For all incomes below $10,000, individuals pay an income tax of -40% (that is, they receive a payment of 40% of their income). For any income above the $10,000 threshold, the tax rate on that additional income is 10%. For the scenario below, calculate the amount of income tax to be paid and after-tax income. Midram earns income of $40,000
Solutions
Expert Solution
Amount of income tax = [(-40%)*(10,000)] + [(10%)*(40,000 -
10,000)] = -4,000 + 3,000 = -1,000
The amount of income tax to be paid = -1,000
That is he gets $1,000
After tax income = 40,000 + 1,000 = $41,000
Rahul Sunny answered 2 years agoRelated Solutions
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