Question

Question 8 (3 points) The column on the left shows the tax base and total tax for two increasing base levels of a tax system. The column on the right classifies the tax rate structure of each tax system as progressive, proportional (flat), or regressive. Fill in the number of the column on the right which you think best classifies the tax rate structure on the left. Each classification may be used more than once. (1 point each) If the tax base is: $40,000 $122.000 The total tax is: $2,800 $8,540 1. Proportional (flat) rate structure 2. Progressive rate structure If the tax base is: The total tax is: $32,000 $1.920 $78,000 $6,240 If the tax base is: The total tax is: $15,000 $1,800 $89,000 $9.790 3. Regressive rate structure

Answer 1

Answer 1
Proportionate Flat Rate Structure
	Income	Tax rate	Tax amount	Cumulative Tax
First	40000	7%	2800	2800
Next	40000	7%	2800	5600
Next	40000	7%	2800	8400
Next	2000	7%	140	8540
Note	We assume that the tax slab amount is fixed at
	40000 and Tax rate is also fixed at 7%
Answer 2
Progressive Rate Structure
	Income	Tax rate	Tax amount	Cumulative Tax
First	32000	6%	1920	1920
Next	40000	9%	3600	5520
Next	6000	12%	720	6240
Next	0	15%	0	6240
Next	0	18%	0	6240
Note	We assume that the Tax rate is progressing
	from 6% - 9% - 12% and so on and the Tax Slab
	is First 32000 , next 40000 , next 50000
Answer 3
Regressive Rate Structure
	Income	Tax rate	Tax amount	Cumulative Tax
First	15000	12%	1800	1800
Next	59000	11%	6490	8290
Next	15000	10%	1500	9790
Next	0	9%	0	9790
Next	0	8%	0	9790
Note	We assume that the Regressive Tax rates are
	12% - 11% - 10% for the slab at 15000 - 59000 and
	for next 65000