Economics • Economic BasicsEasy
What does a 'Regressive Tax' system imply regarding tax incidence across different income groups?
A. Takes a larger percentage of income from high-income earners than low-income earners
B. Takes a larger percentage of income from low-income earners than high-income earners✓ Correct Answer
C. Takes the exact same percentage of income from all income groups
D. Taxes are levied exclusively on corporate profits
💡 Solution & Explanation
A regressive tax takes a larger percentage of income from low-income earners than from high-income earners because the tax rate decreases as the taxable amount increases, exemplified by indirect taxes like goods and services taxes. Progressive taxes, by contrast, levy higher percentages on higher income brackets.
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