2. Progressive and regressive tax systems Aa Aa The following table shows the ta

Question

2. Progressive and regressive tax systems Aa Aa The following table shows the taxable income and tax liability for three single individuals in a certain country. For example, a person with an income of $10,000 has to pay $1,800 in taxes. Taxable Income $10,000 $20,000 $30,000 Tax LIability $1,800 $3,000 $3,600 Average Tax Rate Using the tax liability figures given, compute the average tax rate (that is, the proportion of income paid in tax) for an individual with an income of $10,000, $20,000, and $30,000, respectively. Then fill in the last column of the tabl with these values. The income tax system for this country is

Explanation / Answer

Average tax rate =(1800/10000)*100

=18%

Average tax rate =(3000/20000)*100

=15%

Average tax rate =(3600/30000)*100

=12%

This income tax system is regressive in the country because with the increase in the income the tax rate is declining.

Taxable Incomes Tax Liability Avrerage tax rate 10,000 1800 18% 20,000 3000 15% 30,000 3600 12%

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