Suppose a government imposes the following tax rates on its citizens.
$$\begin{array} { | c | c | }
\hline \text { Income } & \text { Tax Rate } \
\hline \text { below } \$ 20,000 & 5 \% \
\hline \$ 20,001 - \$ 40,000 & 3 \% \
\hline \text { above } \$ 40,000 & 2 \% \
\hline
\end{array}$$
The government has imposed a ________ tax system because the tax rate ________ with the level of income.

Question

Suppose a government imposes the following tax rates on its citizens.
$$\begin{array} { | c | c | } 
\hline \text { Income } & \text { Tax Rate } \
\hline \text { below } \$ 20,000 & 5 \% \
\hline \$ 20,001 - \$ 40,000 & 3 \% \
\hline \text { above } \$ 40,000 & 2 \% \
\hline
\end{array}$$
The government has imposed a ________ tax system because the tax rate ________ with the level of income.

Quizplus · Accepted Answer

This tax system is regressive because the tax rate decreases as the level of income increases, which is characteristic of a regressive tax system.

Suppose a Government Imposes the Following Tax Rates on Its