QUESTION 21. Consider the following version of the earned income tax credit (EITC).All persons who earn less than $20,000 are given a wage subsidy of $0.50 for each dollarworked. The maximum benefit is therefore $10,000.All persons who earn between $20,000 and $30,000 are paid the maximum benefit of$10,000. This is the income disregard region.The phaseout occurs in the income range from $30,000 to $50,000. In this range the maximumbenefit $10,000 is cut by $0.50 for each dollar earned. For example, a person who earns$30,001 will get paid $10,000 -$0.50 = $9,999.50. At an income of $50,000 the program hasbeen totally phased out.Now focus on a person initially working and earning $15,000 before the plan is introduced.Consider the net effect of this program (i.e, we are talking in this question about BOTH theincome and substitution effects) for a person earning this amount. The program will:a. have no effect on time spent workingb. cause time spent working to risec. cause time spent working to fallmay cause time spent working to rise, fall, or remain the samed.

Income is a residual amount left after netting of net expenses incurred to earn that income. The net…

1. Consider the following version of the earned income tax credit (EITC). All persons who earn less than $20,000 are given a wage subsidy of $0.50 for each dol. vorked. The maximum benefit is therefore $10,000. All persons who earn between $20,000 and $30,000 are paid the maximum benefit of $10,000. This is the income disregard region. The phaseout occurs in the income range from $30,000 to $50,000. In this range the m penefit $10,000 is cut by $0.50 for each dollar earned. For example, a person who earn $30,001 will get paid $10,000 -$0.50 = $9,999.50. At an income of $50,000 the program been totally phased out. Now focus on a person initially working and earning $15,000 before the plan is introdud %3D

1. Consider the following version of the earned income tax credit (EITC). All persons who earn less than $20,000 are given a wage subsidy of $0.50 for each dol. vorked. The maximum benefit is therefore $10,000. All persons who earn between $20,000 and $30,000 are paid the maximum benefit of $10,000. This is the income disregard region. The phaseout occurs in the income range from $30,000 to $50,000. In this range the m penefit $10,000 is cut by $0.50 for each dollar earned. For example, a person who earn $30,001 will get paid $10,000 -$0.50 = $9,999.50. At an income of $50,000 the program been totally phased out. Now focus on a person initially working and earning $15,000 before the plan is introdud %3D

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter9: Payroll, Estimated Payments, And Retirement Plans

Section: Chapter Questions

Problem 16MCQ

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