Question

A _________________________ is calculated as a flat percentage of income earned, regardless of level of income.

(A) progressive tax
(B) regressive tax
(C) proportional tax
(D) estate and gift tax

Answer 1

(C) proportional tax

Step-by-step explanation:

A proportional tax is that tax system whose tax rate is always the same, regardless of the tax base, the same tax rate will always apply. It is the opposite of progressive tax.

These types of taxes do not establish differences depending on the level of income of people. Unlike the progressive taxes, the same percentage will always be applied to the tax base. Unlike progressive taxes, proportional taxes do not fulfill a redistribution of income function.

Answer 2

Answer: C

Step-by-step explanation:

A proportional tax is an income tax system where the same percentage of tax is levied on all taxpayers, regardless of their income. A proportional tax applies the same tax rate across low, middle, and high-income taxpayers.

In contrast, the progressive tax system adjusts tax rates by incomes. A marginal rate taxing system, such as the flat tax, has a constant rate for both businesses and individual taxpayer . In some instances, a sales tax can also be considered a type of proportional tax since all consumers, regardless of earnings, are required to pay the same fixed rate. The sales tax rate applies to goods and services, and the income of the purchaser is not a part of the equation. Other examples include poll taxes and the capped portion of the Federal Insurance Contributions Act (FICA) payroll deductions.

In a proportional tax system, all taxpayers are required to pay the same percentage of their income in taxes. For example, if the rate is set at 20%, a taxpayer earning $10,000 pays $2,000 and a taxpayer earning $50,000 pays $10,000. Similarly, a person earning $1 million would pay $200,000.