Question

Keep the Highest: /3 Attempts: 5. Computing the implicit marginal tax rate Suppose Kate is a single parent with one child, and she is trying to determine the effect of transfer benefits and taxes on her implicit marginal tax rate (and thus her incentive to work). The following table shows the transfer benefits and income taxes at various income levels in the economy in which Kate resides. Compute the spendable income level Kate would have at each level of earned income, and enter these values in the last column. Earned Income from Work Spendable Income Transfer Benefits Income and Employment Taxes (Dollars) (Dollars) (Dollars) (Dollars) 9,789 9,789 6,000 8,611 281 12,000 7,179 794 18,000 5,302 1,314 2,159 24,000 2,156 2,705 30,000 1,408 If Kate's income from work increased from $18,000 to $24,000, her implicit marginal tax rate would be If Kate's income from work increased from $24,000 to $30,000, her implicit marginal tax rate would be

Answer 1

Solution:- First we can estimate the spendo ble income in each case Earned Income from work (E) Taons per Benefits B ($) income and employment taxes (T) (8) Spendable income E+B-TCS 9789 9789 8.611 6,000 14330 981 1 2000 7179 794 18385 18000 5302 1314 21922 99000 2156 2159 23997 30,000 1408 2705 28403 Implicit Marginal Tax rate - omal Tay gate 1 - (change in spendable income / change to income - from work)xico * Df kate's income from work increased from $18,000 to $24,000 Chance in Spendable income = 23997 - 91988 $2009 Change in income from work = 24000 - 18000 = $6000 Implicit Marginal tax rate = -(2009. 7x+00 - 66.51). * Tf kate's income from work increased from $24000 to $30,000 Change in spendable income = (28703 - 2399+) - $4706 change in income from work - 30.000- 24,000 - $6000 Impucit Marginal tax rate : 47067 xoo 60oo .561 (I Hope This answer doubts, I will promise day. Thank you) will help you. If you have any you to clear your doubts. Have a nice