Business, 06.04.2020 22:39 alisucaalisuca

There are 4 households in a locality. The annual income of the first household $20,000, the annual income of the second household is $47,000, the annual income of the third household is S50,000, and the annual income of the fourth houschold is $71,000. If the income tax rate for the fourth household is higher than 1. the income tax rate for the second household, it can be inferred that the government follows a income tax system. A) regressive B) progressive C) value-added D) proportional

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Answer from: shauna94

b) The progressive income tax system

Explanation:

The tax is compulsory contribution levied by the authority in a territory on goods, services, income and profit.

Proportional income tax :Income tax is said to be proportional where the same tax rate is paid by all irrespective of their income bracket.

A progressive income tax is that where the tax rate becomes higher for those income earners in the high income bracket. The tax rates on every dollar earned becomes higher with increase in income.

The regressive income tax is where a lower percentage is paid as tax as the income income increases. Lower rate is paid on additional dollar earned.

The scenario in the question falls under the concept of progressive income tax system

Answer from: sandeebassett3

B) progressive

Explanation:

Tax rates can be proportional, progressive or regressive:

Progressive taxes increase as the income level of the taxpayers increases. In this case, the marginal tax rate of the fourth household (with the highest income) is higher than the marginal tax rate of the second household (with a much lower income). Regressive tax rates are basically taxes whose rate increases as your income decreases. Generally you do not need to increase the marginal tax rate of lower income levels, all you need to do is have a flat tax that taxes everyone with the same amount. E.g. everyone pays $2,000 as income taxes. $2,000 per person represents 10% of the first household's income, but it only represents 2.7% of the fourth household's income.Proportional tax rates are considered by many as regressive, but technically they are equal for everybody, so they must be classified separately. E.g. sales taxes are equal for everyone, if the sales tax is 7%, everyone pays 7%, no matter how rich or poor they are. This is why proportional tax rates are said to be regressive when applied to basic necessities, but that is a normative statement.

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Answer from: Quest

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There are 4 households in a locality. The annual income of the first household $20,000, the annual i...