A councilman has presented a detailed proposal for a universal basic income. Under his proposal, every...
A councilman has presented a detailed proposal for a universal basic income. Under his proposal, every adult citizen in the US would receive an annual payment of $15,000 and every citizen under 18 would receive $3,500. These benefits would be financed through a set of taxes. The councilman’s proposal is to finance the basic income through a 25% tax on wage and salary income.
a. draw an income leisure diagram for a family with two adults and two children. Assume 8500 hours in a year and that one of the adults makes $60 per hour, while the other stays home and takes care of children.
b. Suppose that the one adult works 2500 hours per year. Use the concepts of income and substitution effect to analyze how this program would affect that one adult’s labor supply. Assume that in the absence of this program, the family received no benefits and paid no taxes.
c. Suppose this family has annual wage and salary income equal to $75,000. What is the net gain (benefit minus taxes) for this family? Suppose this family has annual wage and salary income equal to $250,000. What is the net gain (benefit minus taxes) for this family.
d. At what level of income, does this family break even in the sense that benefits received are equal to taxes paid?
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