Question

In the United States people pay many types of taxes. Income tax is an example of a regressive tax which increases as a person’s income rises.

1. True, the percentage of income paid increases as people earn higher wages.

2. False, income taxes are progressive which is why they increase as income rises.

3. False, as income increases, the proportion of tax falls and the wealthy pay less taxes than the poor.

4. True, regressive taxes are the most common type of taxes in the U.S

Answer 1

The overall federal tax system is progressive, with total federal tax burdens a larger percentage of income for higher-income households than for lower-income households.

Not all taxes within the federal system are equally progressive. Some federal taxes are regressive, as they make up a larger percentage of income for lower-income than for higher-income households.

The individual and corporate income taxes and the estate tax are all progressive. By contrast, excise taxes are regressive, as are payroll taxes for Social Security and Medicare. Regressivity can be seen over some range of income.