Asked by Estefani Zuniga Rodriguez on May 12, 2024
Verified
A country is using a proportional tax when
A) its marginal tax rate equals its average tax rate.
B) its marginal tax rate is less than its average tax rate.
C) its marginal tax rate is greater than its average tax rate.
D) it uses a lump-sum tax.
Proportional Tax
A tax system where the tax rate remains constant regardless of the amount on which the tax is levied.
Marginal Tax Rate
The percentage at which the next dollar earned of taxable income is subjected to tax.
Average Tax Rate
The total amount of taxes paid by an individual or business divided by the taxable income, reflecting the proportion of income paid in taxes.
- Explain the features and impacts of progressive, proportional, and lump-sum taxation policies.
- Understand the distinction between marginal and average tax rates.
Verified Answer
MC
Matthew ColvinMay 15, 2024
Final Answer :
A
Explanation :
In a proportional tax system, the marginal tax rate (the tax rate on an additional dollar of income) equals the average tax rate (total taxes paid divided by total income), meaning everyone pays the same percentage of their income in taxes, regardless of income level.
Learning Objectives
- Explain the features and impacts of progressive, proportional, and lump-sum taxation policies.
- Understand the distinction between marginal and average tax rates.