Question

Income Tax owed with System A Tax owed with System B Tax owed with System C...

Income

Tax owed with System A

Tax owed with System B

Tax owed with System C

$25,000

$5,000

$15,000

$2,500

$50,000

$10,000

$20,000

$10,000

$75,000

$15,000

$25,000

$22,500

$100,000

$20,000

$30,000

$40,000

a. What is Tax System A, progressive, proportional, or regressive?

b. What is Tax System B, progressive, proportional, or regressive?

c. What is Tax System C, progressive, proportional, or regressive?

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Homework Answers

Answer #1

a. It is proportional
(Percentage of tax owed:
(5,000/25,000)*100 = 20%
(10,000/50,000)*100 = 20%
(15,000/75,000)*100 = 20%
(20,000/100,000)*100 = 20%
Percentage of tax owed is same. So, it is proportional.)

b. It is regressive
(Percentage of tax owed:
(15,000/25,000)*100 = 60%
(20,000/50,000)*100 = 40%
(25,000/75,000)*100 = 33.33%
(30,000/100,000)*100 = 30%
Percentage of tax owed decreases with increase in income. So, it is regressive.)

c. It is progressive
(Percentage of tax owed:
(2,500/25,000)*100 = 10%
(10,000/50,000)*100 = 20%
(22,500/75,000)*100 = 30%
(40,000/100,000)*100 = 40%
Percentage of tax owed increases with increase in income. So, it is progressive.)

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