Suppose that the government collected taxes in the following fashion: people who earn less than $50,000 pay 25 percent in taxes, people who earn between $50,000 and $100,000 pay 35 percent in taxes, people who earn between $100,000 and $200,000 pay 30 percent in taxes, and people who earn more than $200,000 pay 28 percent in taxes. Which of the following statements is correct?
A)The tax system is proportional for income levels less than $50,000 and regressive for income levels above $50,000.
B)The tax system is regressive for income levels less than $100,000 and progressive for income levels above $100,000.
C)The tax system is progressive for income levels less than $100,000 and regressive for income levels above $100,000.
D)The tax system is progressive for income levels less than $50,000 and proportional for income levels above $100,000.

Question

Quizplus · Accepted Answer

The tax system is progressive for income levels less than $100,000 as the tax rate increases as income increases from 25% to 35%. However, the tax system becomes regressive for income levels above $100,000 as the tax rate for the $100,000-$200,000 bracket is lower than the $50,000-$100,000 bracket, and the tax rate for the over $200,000 bracket is lower than the $100,000-$200,000 bracket.

Suppose That the Government Collected Taxes in the Following Fashion