Scenario 20-2 Suppose That a Society Is Made Up of Five Families

Multiple Choice

Scenario 20-2
Suppose that a society is made up of five families whose incomes are as follows:
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$120,000; $90,000; $30,000; $30,000; and $18,000.
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The federal government is considering two potential income tax plans:
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Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.
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Plan B is a two-tiered plan where families earning less than $35,000 pay no income tax and families earning more than $35,000 pay 10% of their income in taxes. The income tax revenue collected from those families earning over $35,000 is then redistributed equally to those families earning less than $35,000.
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-Refer to Scenario 20-2. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of libertarianism prefer?

A) Neither Plan A nor Plan B because any plan that forcibly redistributes income is against the philosophy
B) Only Plan A
C) Only Plan B
D) Either Plan A or Plan B