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In this video we will learn about negative income taxes. Youll learn what a negative income tax is and see a simple explanation of how it works. Negative income taxes take the progressive tax system even further. Rather than not tax lower income earners, it actually provides them with additional financial support that is reduced as their income rises. To understand how this works, lets look at a system that does not have a negative income tax system. All income up to $20,000 is earned tax free. Beyond this point different marginal tax rates apply. Under a negative tax rate system, the marginal tax rates still apply but the only thing changes applies to lower income earners. The lower you are from the $20,000 income threshold, the more support you receive from government. In the example given a family on an income of $5,000 would receive a benefit equal to 25% of the difference between their income and the upper band of the threshold. In this case, thats 25% of $15,000 $15,000 for a
