Suppose that the Earned Income Tax Credit is set up so that a maximum payment of...
Suppose that the Earned Income Tax Credit is set up so that a maximum payment of $3,000 can be earned when a qualified worker earns $10,000. This payment represents a subsidy of 30 cents for each additional dollar earned up to $10,000.
Workers earning between $10,000 and $14,000 are eligible for the maximum payment. Once labor market earnings exceed $14,000, additional earnings reduce the subsidy by 45 cents for each dollar earned.
The going wage rate is $10 per hour.
What is the slope of the budget constraint with the EITC for anyone earning more than $14,000 but still eligible for the EITC?
Homework Answers
For first $10000, the subsidy is 30 cents for each additional dollar earned up to $10000
For earnings between $10000 and $14000, the maximum payout is $3000
For earnings exceeding $14000, the additional earnings reduce the subsidy by 45 cents for each dollar earned.
Thus, the slope of the budget constraint with EITC with earnings > $14000 with EITC eligibility is: -45
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Suppose that the Earned Income Tax Credit is set up so that a
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Suppose that the Earned Income Tax Credit is set up so that a maximum payment of $3,000 can be earned when a qualified worker earns $10,000. This payment represents a subsidy of 30 cents for each additional dollar earned up to $10,000. Workers earning between $10,000 and $14,000 are eligible for the maximum payment. Once labor market earnings exceed $14,000, additional earnings reduce the subsidy by 45 cents for each dollar earned. The going wage rate is $10 per hour....
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Suppose that the Earned Income Tax Credit is set up so that a maximum payment of $3,000 can be earned when a qualified worker earns $10,000. This payment represents a subsidy of 30 cents for each additional dollar earned up to $10,000. Workers earning between $10,000 and $14,000 are eligible for the maximum payment. Once labor market earnings exceed $14,000, additional earnings reduce the subsidy by 45 cents for each dollar earned. The going wage rate is $10 per hour....
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