Question 8 of 8 sepling The incomes of five citizens from the Mediterranean nati

Question

Question 8 of 8 sepling The incomes of five citizens from the Mediterranean nation of Castelluocia are shown below. In an effort to reduce the drastic income inequality that has prevailed for decades, the government introduces new program for low-wage eaners. Under this program each citizen is given a refund, paid for from tax revenues, equal to a percentage of their income. The chart below shows applicable income brackets and the percentage to be refunded Income Supplement (% of Original) 40% 25% Income Frankie25000 Vinnie 31000 0-17,000 17,001-36,000 36.001-52,000 52,001 and Above 16000 Artie Nicky 64000 ackie25000 110% 10% For each of the citizens below, please calculate the amount of their refund Which of the following characteristics of the Welfare State is avoided by the supplement's gradual decline? Frankie Artie Nicky evenue Shortfalt Number Number Number A Notch O Infiation Recession

Explanation / Answer

To compute the amound of tax refund, note that the same rule of marginal taxation is applied to this case

Refund to Frankie = 0.40*17000 + 0.25*(25000 - 17000) = 8800

Refund to Artie = 0.40*16000 = 6400

Refund to Nicky = 0.40*17000 + 0.25*(36000-17000) + 0.10(52000-36000) = 13150

The feature of welfare state ignore here is Notch since the more income a person is getting the lesser benefits are available to him.

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