Question: 1. Consider a EITC program that offers a guaranteed income level. Assume a person can receive a maximum EITC benefit of $5,000 when earned income

1. Consider a EITC program that offers a guaranteed income level. Assume a person can receive a maximum EITC benefit of $5,000 when earned income is $0; however, the maximum benefit is reduced at a 40% phase-out rate for each dollar earned beyond $0.

If 40% is the phase-out rate, what is the marginal tax rate on EITC benefits if earned income is greater than thebreak-even point?

2. Consider a EITC program that offers a guaranteed income level. Assume a person can receive a maximum EITC benefit of $5,000 when earned income is $0; however, the maximum benefit is reduced at a 40% phase-out rate for each dollar earned beyond $0.

If 40% is the phase-out rate, what is the marginal tax rate on EITC benefits if earned income is $0.

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