ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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taxable purchases are capped at $50, 000 a year.
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wealthier people pay less tax on a purchase than poorer people would pay on the same item.
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most people cannot afford to buy such luxury goods as yachts, furs, and diamonds
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poorer taxpayers spend a larger proportion of their income on taxable goods and services than do wealthier taxpayers.
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Detailed explanation-1: -What is Regressive Tax. Definition: Under this system of taxation, the tax rate diminishes as the taxable amount increases. In other words, there is an inverse relationship between the tax rate and taxable income. The rate of taxation decreases as the income of taxpayers increases.
Detailed explanation-2: -Regressive taxes benefit higher-income individuals since taxes decrease as income increases. With progressive taxes, however, taxes are based on an individual’s specific amount of taxable income, and the tax rates increase as income increases.
Detailed explanation-3: -Excise taxes are particularly regressive. Households in the lowest one-fifth by income faced an average federal excise tax rate that is nine times greater than the average excise tax rate faced by the top 1 percent of households.
Detailed explanation-4: -Progressive taxation is when the income tax levied on individual increases as his/her income increases.