Question

As part of Budget 2018, the Government of Canada introduced the Canada Workers Benefit (CWB) that will take affect starting on January 1, 2019. The CWB is a tax credit that supplements the earnings of low-income workers. For a single individual with no children, the structure of the CWB in 2023 is as follows. - No credit for earnings less than or equal to $3,000 - A 27% credit on each dollar of income earned over $3,000 up to a maximum of $1,428 - The maximum credit is reduced by 15% for each dollar eared above $23,495 Based on these parameters, please answer the following.

(a) What is the "phase in" region for the CWB? In other words, what is the income range over which workers receive an increasing CWB subsidy? You may answer using a graph, an equation or using words. If you choose to characterize the phase-in region using words, then your answer must be very precise.

Answer 1

The "phase in" region for the CWB in 2023 is the income range from $3,001 to approximately $8,289.67 for a single individual with no children, where the CWB credit increases by 27% of every dollar earned over $3,000 up to the maximum of $1,428.

Step-by-step explanation:

The "phase in" region for the Canada Workers Benefit (CWB) in 2023 is the income range over which low-income workers earn an increasing CWB subsidy. This occurs when the worker's earnings are greater than $3,000 but less than or equal to the point at which the maximum CWB amount of $1,428 is reached. Based on the 27% credit rate provided on each dollar of income over $3,000, we can calculate the upper threshold of the phase in range by dividing the maximum credit ($1,428) by the credit rate (0.27), which gives us about $5,289.67. Therefore, we add this threshold to the $3,000 minimum threshold to find the top of the phase in range, the result is approximately $8,289.67. Consequently, the phase in region extends from $3,001 to approximately $8,289.67 for a single individual with no children.

It is in this phase in range that the credit increases with each additional dollar earned above the $3,000 threshold, serving as an incentive for work and helping to avoid the 'poverty trap' where individuals may choose not to earn more due to losing nearly equivalent amounts in government support payments. Once a worker's earnings exceed this phase in range, they will receive the maximum credit of $1,428 until their income reaches $23,495, at which point the credit begins to phase out.