The next three Parts are based on the table below which shows a payments schedule for a hypothetical negative income tax program. Family income Tax liability $2000 3000 4000 5000 - $3200 - 2800 - 2400 - 2000 A) Assuming that it is constant, what is the benefit reduction rate? (a) 25 percent (b) 40 percent (c) 50 percent (d) 60 percent (e) 75 percent B) What is the breakeven level of income? (a) $7,000 (b) $ 8,000 (c) $ 9,000 (d) $10,000 (e) $12,000 C)What is the "guarantee" or the after-tax income when pre-tax income is zero? (a) $3,000 (b) $3,500 (c) $4,000 (d) $4,500 (e) $5,000
The next three Parts are based on the table below which shows a payments schedule for a hypothetical negative income tax program. Family income Tax liability $2000 3000 4000 5000 - $3200 - 2800 - 2400 - 2000 A) Assuming that it is constant, what is the benefit reduction rate? (a) 25 percent (b) 40 percent (c) 50 percent (d) 60 percent (e) 75 percent B) What is the breakeven level of income? (a) $7,000 (b) $ 8,000 (c) $ 9,000 (d) $10,000 (e) $12,000 C)What is the "guarantee" or the after-tax income when pre-tax income is zero? (a) $3,000 (b) $3,500 (c) $4,000 (d) $4,500 (e) $5,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Here they are following negative income tax program.
For every increase of $1000 in income the negative tax liability decreases by $400.
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