Suppose $T = .02 I ^ { \alpha }$
.If taxes are regressive which of the following is true?

Question

Suppose $T = .02 I ^ { \alpha }$
 .If taxes are regressive which of the following is true?
A) $\alpha >1$
B) $0 < \alpha < 1$
C) $\alpha= 1$

D) $\alpha= 0$

Quizplus · Accepted Answer

If taxes are regressive, it means that the tax rate decreases as income increases. In this case, since the tax function T is a function of income I raised to the power of some constant alpha, the higher the value of alpha, the steeper the increase in tax rate with respect to income. Therefore, a value of alpha less than 1 (Option B) would correspond to a regressive tax system in which the tax rate increases at a decreasing rate with respect to income.  Options A, C, and D do not yield a regressive tax system.

Suppose T=.02IαT = .02 I ^ { \alpha }T=.02Iα If Taxes Are Regressive Which of the Following Is True

Suppose $T = .02 I ^ { \alpha }$ If Taxes Are Regressive Which of the Following Is True