A tax whose impact varies inversely with the income of the person taxed, and poor people have a higher percentage of their income taxed than rich people, is known as a:
A) regressive tax.
B) progressive tax.
C) proportional tax.
D) flat tax.
E) tax holiday.

Question

Quizplus · Accepted Answer

A regressive tax imposes a higher percentage of taxation on low-income earners than on high-income earners. This is because, as income decreases, the taxpayer must spend a larger percentage of their income on necessities, leaving less available for taxes. As income rises, the percentage of income spent on necessities decreases, thereby reducing the impact of the tax.

A Tax Whose Impact Varies Inversely with the Income of the Person