Question

Which of these individuals would be subject to the "kiddie tax"?

a. Dana, age 12, earned $800 in dividends, with no other income.
b. Gia, age 15, worked as a lifeguard all summer and earned $2,800 with no other income.
c. Kyle, age 14, earned $1,000 in interest and had a $1,800 royalty from a family oil well. He had no other income.
d. Paul, age 19, is taking a year off before starting college. He received $4,200 in dividends with no other income.

Answer 1

To understand Susan's work incentives under government assistance, a table is created showing hours worked, earnings from work, government support, and total income, clearly illustrating how government benefits decrease with increased earnings and the potential impact on Susan's choice to work.

Step-by-step explanation:

Understanding the Impact of Government Assistance on Work Incentives:

To analyze the impact of government assistance on Susan's incentive to work, it is essential to create a table that shows the interaction between her earnings from work and the consequent reduction in government support. Susan can earn $8 per hour, and she can work up to 2,000 hours per year. If she does not work at all, she receives $16,000 in government benefits. However, for every dollar earned from work, her government support decreases by a dollar.

Here's a simplified example of how the table should be structured:

• Hours Worked: Shows the different levels of work hours Susan could choose to work up to 2,000 hours.
• Earnings from Work: This will be the hours worked multiplied by her wage rate (Hours Worked x $8).
• Government Support: Will decrease from the maximum of $16,000 based on the amount earned from work (Government Support = $16,000 - Earnings from Work).
• Total Income: The sum of Earnings from Work and Government Support.

Creating this table would allow us to visualize the point at which Susan's work would not only replace her welfare benefits but would also start to enhance her overall income, demonstrating the relationship between labor supply and welfare programs.

Answer 2

To evaluate Susan's work incentives under a government assistance program, a table reflecting her hourly work, earnings, government support, and total income demonstrates how increased work reduces her benefits, potentially disincentivizing additional work hours. Additional opportunity costs associated with working can further decrease the incentive to work.

Step-by-step explanation:

Understanding the Impact of Government Assistance on Work Incentives

To analyze the impact of government assistance on Susan's incentive to work, we must consider the opportunity costs and the potential benefits of working versus not working. Let's construct a table to illustrate Susan's financial options based on different levels of work. For each hour Susan works, she loses a dollar in government benefits, impacting her total income and potentially her incentive to work.

• Hours Worked: The number of hours Susan chooses to work in a year.
• Earnings from Work: The total amount Susan earns from work, calculated as hours worked multiplied by her hourly wage of $8.
• Government Support: The amount of government assistance Susan will receive, which starts at $16,000 and decreases by $1 for each $1 earned from work.
• Total Income: The sum of Susan's earnings from work and government support.

The table would indicate that as Susan increases her hours of work, her earnings from work increase, but her government support decreases, leading to different total income levels. This structure may reduce her incentive to work more hours because the gain from working additional hours is effectively nullified by the corresponding reduction in government support.

Considering additional opportunity costs, such as childcare, transportation, and time away from children, Susan may find that working more hours results in diminishing financial returns and personal costs, further impacting her decision to engage in more work. Ultimately, these factors need to be balanced against the financial and non-financial rewards of employment.