Scenario: There are 4 households in a locality. The annual income of the first household is $20,000, the annual income of the second household is $47,000, the annual income of the third household is $50,000, and the annual income of the fourth household is $71,000.
-Refer to the scenario above.Which family pays the highest percentage of its income in tax if the income taxes collected by the local government are regressive in nature?

Question

Quizplus · Accepted Answer

If income taxes collected by the local government are regressive in nature, it means that the tax rate decreases with increasing income. Therefore, the lower income households pay a higher percentage of their income in taxes compared to the higher income households. In this scenario, the first household has the lowest income and would likely pay a higher percentage of their income in taxes compared to the other households. Therefore, the first household pays the highest percentage of its income in tax.

Scenario: There Are 4 Households in a Locality