Which of the following examples illustrates a regressive income tax?
A) I earn $500 and pay $50 in taxes; you earn $1,000 and pay $90 in taxes.
B) I earn $500 and pay $50 in taxes; you earn $1,000 and pay $100 in taxes.
C) I earn $500 and pay $50 in taxes; you earn $1,000 and pay $110 in taxes.
D) I earn $500 and pay $50 in taxes; you earn $1,000 and pay $125 in taxes.

Question

Quizplus · Accepted Answer

In a regressive tax system, the tax rate decreases as income increases. In option A, the tax rate for the lower income is 10% ($50/$500), while for the higher income it is 9% ($90/$1000), illustrating a regressive tax.

Which of the Following Examples Illustrates a Regressive Income Tax