Question

John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020 , John worked as a computer technician at a local university earning a salary of $153,800, and Sandy worked part time as a receptionist for a law firm earning a salary of $30,800. John also does some Web design work on the side and reported revenues of $5,800 and associated expenses of $1,650. The Fergusons received $1,160 in qualified dividends and a $290 refund of their state income taxes. The Fergusons always itemize their deductions, and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2020 AMT exemption for reference.

Answer 1

To answer the question, a table is created to show the trade-off between the hours Susan works and her combined income from wages and reduced government benefits, highlighting the impacts on her work incentive and considering opportunity costs.

Step-by-step explanation:

The student's question involves calculating the total income for Susan, a single mother, given her potential earnings from work and the impact on her government benefits.

To provide a complete answer, we would create a table that includes Susan's work hours, her earnings, the reduced government support due to those earnings, and her total income combining both sources.

Additionally, we would discuss how this situation impacts Susan's incentive to work and whether there are opportunity costs that may affect her decision.

Example of How the Table Would Look:

Hours Worked per YearEarnings from WorkGovernment SupportTotal Income0$0$16,000$16,000200$1,600$14,400$16,000... and so on until ...1,800$14,400$1,600$16,000

The table illustrates that for every dollar Susan earns, her government support decreases by an equal amount, thus her total income remains constant at $16,000 unless she works more than 2,000 hours, which is not a choice in this scenario, or unless the benefits would cap at a certain point not mentioned in the question.

We can infer that such an assistance program could reduce Susan's incentive to work more hours since her total income doesn't increase with additional work. Opportunity costs such as childcare or transportation may also reduce her incentive to work.