Question

Troy earning $40,000 and Matt with income of $30,000 each pays a $2,000 property tax on their separate $100,000 appraised houses

A) Income Tax
B) Sales Tax
C) Property Tax
D) Excise Tax

Answer 1

The tax that Troy and Matt are paying on their houses is a property tax, which is based on the property's value rather than the owner's income.

Step-by-step explanation:

The subject of the question relates to the type of tax Troy and Matt are paying on their $100,000 appraised houses. Given that they each pay a $2,000 tax based solely on the value of their property, it can be determined that this tax is a property tax.

Property taxes are imposed on assets such as homes, land, and businesses, and are used by local governments to raise revenue. These taxes are based on the property's assessed value, as determined by a government official such as a local assessor, and a tax rate is applied to this value. Unlike other taxes like sales tax or income tax, property tax is not based on transactions or the owner's income, but on the property value itself.

Although Troy and Matt have different incomes ($40,000 and $30,000 respectively), they are each paying the same amount in property taxes because property taxes are not progressive based on income but are proportional to the property's value. This differs from income taxes, where individuals with higher incomes often pay higher tax rates, resulting in a progressive tax system.