Question

suppose ryan, a retired employee, has an income that is below the poverty threshold income level. he receives food stamps and housing benefits from the government. for every $100 he earns, his food stamp benefits are reduced by $30 and housing benefits are reduced by $15 because of marginal taxes. the combined implicit marginal tax rate paid by ryan is:

Answer 1

Ryan's combined implicit marginal tax rate, calculated by summing the reductions in food stamp and housing benefits, is 45%.

Step-by-step explanation:

The combined implicit marginal tax rate paid by Ryan is calculated by adding the reduction rates of his food stamp and housing benefits as his income increases. For every $100 Ryan earns, his food stamp benefits are reduced by $30 and housing benefits are reduced by $15. Therefore, the combined reduction amounts to $30 + $15, which is $45. Thus, for every $100 earned, Ryan effectively pays $45 in the form of reduced benefits. The combined implicit marginal tax rate is the percentage of this reduction relative to the amount earned, which would be $45 out of $100, or 45%