at what income is the credit reduced to zero, Public Economics

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Assume the Working Income Tax Benefit tops up a single individual's income by 25 percent of the amount that employment earnings exceed $3000, up to a maximum payment of $950. Suppose the refundable credit is reduced by 15 percent on the amount of earnings in excess of $10,500.

a.  Then over what range of earnings is the credit at its maximum value?

b.  At what income is the credit reduced to zero?

c.  Let the statutory income tax be a flat rate of 30 percent, with a basic personal exemption of $10,000. Ignore all other taxes and program benefits in the economy. Calculate and explain the effective marginal tax rate (EMTR) faced by this individual on income ranging from zero to $20,000.

d.  Discuss the incentive effects associated with this EMTR schedule, regarding the decision to join the workforce and to enhance  hours worked, say, from part-time to full-time. 


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