A government introduces a tax-free allowance so that the first $10 000 of income is not taxed. This policy is most likely intended to
Question 1 Report
A government introduces a tax-free allowance so that the first $10 000 of income is not taxed. This policy is most likely intended to
Answer Details
The correct answer is help lower-income workers keep more of their earnings.
A tax-free allowance (also called a personal allowance) means the first portion of a worker's income is not subject to tax. This benefits all workers, but it has the greatest proportional impact on lower-income earners because the untaxed amount represents a larger share of their total income. For example, a $10,000 tax-free allowance saves the same absolute amount for everyone, but it shields a much larger fraction of a $15,000 salary than a $100,000 salary. The policy therefore makes the overall tax system more progressive and helps reduce the tax burden on the lowest earners.
Increasing national debt, reducing growth, or discouraging workers from seeking higher-paid jobs are not objectives of a tax-free allowance and do not logically follow from its introduction.
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