Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 × Income) − $10,000. If a family doesn't earn any income, how does the negative income tax affect it?

A) It will receive an income subsidy of $1,000.
B) It will receive an income subsidy of $3,000.
C) It will receive an income subsidy of $10,000.
D) It will not be affected at all, since the negative income tax requires a family to earn income.

Income Subsidy

An income subsidy is a government-provided financial assistance program intended to boost an individual's income to a level sufficient for meeting basic living standards.

Negative Income Tax

A program where the government provides additional income to those who earn under a specific threshold, rather than collecting taxes from them.

Tax Liability

Tax liability is the total amount of tax that an individual or organization is legally obligated to pay to a taxing authority based on earnings, property ownership, or other taxable conditions.