Questions: If a person is taxed 100 on an income of 1,000, taxed 180 on an income of 2,000, and taxed 220 on an income of 3,000, this person is paying a: progressive tax. poll tax. proportional tax. regressive tax.

If a person is taxed 100 on an income of 1,000, taxed 180 on an income of 2,000, and taxed 220 on an income of 3,000, this person is paying a:
progressive tax.
poll tax.
proportional tax.
regressive tax.
Transcript text: If a person is taxed $\$ 100$ on an income of $\$ 1,000$, taxed $\$ 180$ on an income of $\$ 2,000$, and taxed $\$ 220$ on an income of $\$ 3,000$, this person is paying a: progressive tax. poll tax. proportional tax. regressive tax.
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Solution

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The answer is the fourth one: regressive tax.

Explanation for each option:

  1. Progressive tax: In a progressive tax system, the tax rate increases as the taxable amount increases. This means that higher incomes are taxed at higher rates. In this scenario, the tax rate decreases as income increases, so it is not a progressive tax.

  2. Poll tax: A poll tax is a fixed amount of tax that every individual pays, regardless of their income or wealth. The tax amounts in this scenario vary with income, so it is not a poll tax.

  3. Proportional tax: A proportional tax, also known as a flat tax, is where the tax rate is constant regardless of income. This means that everyone pays the same percentage of their income in taxes. In this scenario, the tax rate is not constant, so it is not a proportional tax.

  4. Regressive tax: In a regressive tax system, the tax rate decreases as the taxable amount increases. This means that lower incomes are taxed at higher rates relative to their income. In this scenario, the tax rate decreases as income increases (10% for $1,000, 9% for $2,000, and 7.33% for $3,000), indicating a regressive tax.

Summary: The person is paying a regressive tax, as the effective tax rate decreases with increasing income.

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