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Question 8 (1 point) If the state government charges an 8% tax rate on the first $50,000 in income earned, and then a 6% tax rate on all income above $50,000, this tax structure would be described as: )regressive. b) lump-sum. c) flat. )progressive.
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Answer #1

Correct answer is : option a: Regressive tax. In this case, as income is increasing fraction is decreasing.

Regressive taxation: as income increases, the fraction of income paid as taxes decreases then there is a decreasing tax rate.

Whereas, Proportional taxation: as income increases, the fraction of income paid as taxes remains
constant then there is a constant tax rate.

Progressive taxation: as income increases, the fraction of income paid as taxes increases then there is an increasing tax rate.

Lump-sum tax will be some fixed amount of tax to be paid.

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