ECON 3C03 McMaster University Income Taxation Discussion

Question Description

I’m working on a economics question and need an explanation to help me study.

As part of Budget 2018, the Government of Canada introduced the CanadaWorkers Benefit (CWB) that will take affect starting on January 1, 2019. TheCWB is a tax credit that supplements the earnings of low-income workers.For a single individual, the structure of the CWB is as follows.

No credit for earnings less than or equal to $3,000
A 26% credit on each dollar of income earned over $3,000 up to amaximum of $1,355
The maximum credit is reduced by 12% for each dollar eared above$12,820
Based on these parameters, please answer the following.

What is the phase in region for the CWB? In other words, what is theincome range over which workers receive a CWB subsidy?
What is the break even level of earnings above which a single workerno longer receives a CWB subsidy?
Based on your answers to parts (a) and (b) and the parameters of theCWB, draw a figure showing the budget constraint of a single worker underthe CWB. Your figure should clearly label the x-axis, y-axis and the incomecutoffs B0, B1 and B2.
In one paragraph or less, explain how the CWB affects the incentive towork for (i) individuals with earnings below B0, (ii) individuals with earningsbetween B0 and B1, (iii) individuals with earnings between B1 and B2, and(iv) individuals with earnings above B2.

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