OTC Marginal Tax Rate Questions
Suppose the welfare benefit formula isWelfare Benefit amount = $8,000 0.67 (Wages earned – $2,000)1. What is the marginal tax rate on:1a. The first $2,000 of wages? (in other words, how much is the tax on first $2000?) 1b. Wages above $2,000? 2. How large is the Welfare benefit amount if wages equal to:2a. $0? 2b. $2,000? 2c. $6,000? 3. What is the breakeven level of income in this case? (In other words, what is the wages earned amount which will equal the $8,000 benefit amount according to the equation given?)