A country operates a negative income tax. In the diagram, the curve NT represents the country’s original tax schedule. If a change in the tax rate moves the schedule to NT1, what effect will this have on work incentives and the distribution of income after tax?
- Awork incentives: strengthen; distribution of income: more equal
- Bwork incentives: strengthen; distribution of income: less equal
- Cwork incentives: weaken; distribution of income: less equal
- Dwork incentives: weaken; distribution of income: more equal