A country operates a negative income tax. In the diagram, curve NT represents the country’s original tax schedule. A change in the tax rate shifts the schedule to NT1. What effect will this have on work incentives and the after-tax distribution of income?
- 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