You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes, and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person. Which of the following statements is correct?
A)A lump-sum tax would achieve the second goal but not the first.
B)A regressive tax would achieve the second goal but not the first.
C)A progressive tax could achieve both goals.
D)A proportional tax could achieve the second goal but not the first.

Question

Quizplus · Accepted Answer

A progressive tax system involves increasing tax rates as income levels increase. This achieves both goals as a person with no income would pay no taxes, and a high-income person would pay a higher proportion of their income in taxes than a low-income person. A lump-sum tax would not achieve the first goal as it taxes everyone the same amount regardless of income. A regressive tax would not achieve the first goal as it taxes low-income earners a higher proportion of their income than high-income earners. A proportional tax would not achieve the first goal as it would tax everyone the same percentage of their income, meaning people with no income would still be taxed.

You Are Trying to Design a Tax System That Will