Afternoon, Attachment. Question One the Break Even

¶ … afternoon, attachment. Question One The break even level of a family of four under the proposal for a negative income tax that grants each person $3,000 annually -- regardless of his or her age -- is $48,000. This figure was derived partly from information that states that the transfers will be phased out at a rate of 25% as earned income increases (Hyman, 2011). Were an individual in such a family to earn $12,000, that amount multiplied by .25 would equal $3,000 dollars -- which is the break even point.

Since there are four people in the family, four times that $12,000 is $48,000 -- which would be the break even point for the entire family. Plotting disposable income as a function of earned income for a situation in which all families above the break even level of income pay a 25% tax on their earnings would require putting the annual disposable income on the x axis and annual earned income on the y axis. The line would be at approximately a 45 degree angle from 0,0.

The principle cost associated with this plan is that not all people in a four person family (such as infants) are able to earn money. Therefore, the adults would have to make a substantial amount of money before they reach the breaking point in some instances. Question Two The needy mother in question would have to work 5.97 hours (approximately 6 hours) per day before her benefits are eliminated.

This figure is derived by calculating the fact that for every dollar after 4 dollars a day that she earns, the authorities are subtracting 67 cents (Hyman, 2011). Since the mother is working at a rate of 4 dollars an hour, the authorities are subtracting $2.68 for each hour after the first one that she works each day. $2.68 multiplied by 5.97 hours would completely delete her $12 benefits a day. That 5.97 hours also takes into account the first $4 each day she is allowed to earn without losing.