If the government of Ghana decide to cut the basic rate of income tax, which will be the larger effect – the income effect or the substitution effect – for people (a) on low incomes just above the tax threshold and (b) on very high incomes? What will be the effect on hours worked in each case (assuming that the person has a choice)?
The cut in basic income tax rate will have different impact on people earning low income and high income individuals. For lower income earners, the cut in basic income tax will have a substitution effect as the lower income earners will tend to invest more time in working and less time in leisure. They will be compelled to save amount of money and invest more money. On the other hand, for high income earners, the individuals will tend to have an income effect. The income effect will compel the high income earners to work less, save less amount of money, and also to invest low amount of money.
The number of hours worked will be increased in case of low income earners and the number of hours worked will decrease in case of high income earners.
If the government of Ghana decide to cut the basic rate of income tax, which will...
Question 1: People decide how to “budget” their time in much the same way that they decide how to budget for different goods. Each person decides how much they “value” their leisure time versus their work time. The more people work, the more they tend to value their remaining leisure time. This is the justification for paying overtime to people working over 40 hours per week. a. How might we model this trade-off economically using the basic labor supply model...
Question 1: People decide how to “budget” their time in much the same way that they decide how to budget for different goods. Each person decides how much they “value” their leisure time versus their work time. The more people work, the more they tend to value their remaining leisure time. This is the justification for paying overtime to people working over 40 hours per week. a. How might we model this trade-off economically using the basic labor supply model...
Question 4: People decide how to “budget” their time in much the same way that they decide how to budget for different goods. Each person decides how much they “value” their leisure time versus their work time. The more people work, the more they tend to value their remaining leisure time. This is the justification for paying overtime to people working over 40 hours per week. How might we model this trade-off economically using the basic labor supply model by...
The government institutes a flat income tax, along with a refundable tax credit that everyone receives regardless of income. Compared to no tax and no refund, which of the following statements correctly describes predicted effects of this policy for single adult households? The effect on labor market participation is ambiguous. Hours worked by the highest earners will unambiguously decline. Hours worked by the poorest workers will unambiguously decline. The effect on hours worked will be ambiguous for all workers. Labor...
Question text Suppose the government imposes a tax of 20 percent on the first $40,000 of income and a tax of 30 percent on income above $40,000 but less than $90,000. Income over $90,000 is taxed at a rate of 40 percent. The marginal tax rate for a person whose income is $45,650 is 30 percent. Select one: True False Question text Alvin earned $30,000 and paid $6,000 in taxes. If Beatrice earned $25,000 then she would have to pay...
What does the term negative refer to in a negative income tax scheme? A.The individual does not have to pay income tax for any of his/her earnings. B.The individual receives a subsidy or a credit rather than paying taxes for a certain number of hours worked. C.The program does not involve any disincentives to working. D.The program involves fewer disincentives to working than does a conventional welfare or social assistance program. For which of the following programs does the recipient...
Suppose the government imposes a tax of 10 percent on the first $20,000 of income, 20 percent on the next 40,000 of income and 30 percent on income above $60,000. For a person whose income is $90,000, the tax liability is _________ and the marginal tax rate is __________. A. $27,000; 30 percent B. $19,000; 20 percent C. $19,000; 30 percent D. $18,000; 20 percent E. $ 9,000; 10 percent Which of the following statements about lump-sum taxes is (are)...
1. An income tax is progressive if Multiple Choice lower-income households pay a larger share of their income in taxes than higher-income households. higher-income households pay a larger share of their income in taxes than lower-income households. most of the tax revenue is used to benefit lower-income households. most of the tax revenue is used to benefit higher-income households. 2. Among the reasons for high CEO pay are all of the following EXCEPT Multiple Choice the people who are capable...
1. The level of income below which the federal government classifies a family as poor is called the: A. relative measure of poverty. B. poverty threshold. C. absolute measure of poverty. D. median income threshold. 2. What is the United States government's formal definition of the poverty line? A. It is the annual income level below which a household is exempt from taxes. B. It is a level of annual income equal to total income in society divided by the...
Tax System and Tax Policy: Taxation of High Incomes1) Background: In this section, draw on Statistics Canada’s public tables to cover the following:Who are the top 1%?· Top income cut-off, average income, share of income from labour & how much tax they pay· Sex and age· Province/LocationCompared to the bottom 50th percentile of tax filers, how has the income share and effective tax rate of the top 1% evolved over the data period?By province, how has the income share and effective tax rate of the province-specific top...