Th4.5: Progressive, Proportional and Regressive Taxes

Question 1

What is tax used for?

Answer 1

to pay for the number of goods and services that the government provides

Question 2

What can tax be used to do?

Answer 2

correct market failure and manage the economy and redistribute income

Question 3

What is progressive tax?

Answer 3

where those who are on higher incomes pay a higher marginal rate of tax - they pay a higher percentage of their income on tax

Question 4

What kind of tax do direct taxes tend to be?

Answer 4

progressive

Question 5

What is a regressive tax?

Answer 5

where the proportion of income paid in tax falls as the income of the taxpayer rises - those on higher incomes pay a smaller percentage of income on the tax

Question 6

What kind of tax are most indirect taxes?

Answer 6

regressive tax

Question 7

What is proportional tax?

Answer 7

where the proportion of income paid on tax remains the same whilst the income of the taxpayer changes - everyone pays the same percentage of their income on the tax