Question

Which of the following is true? Multiple Choice A regressive tax rate structure imposes an increasing marginal tax rate as the tax base increases. Regressive tax structures are the most common tax rate structure. An example of a regressive tax is an excise tax, In terms of effective tax rates, a sales tax can be viewed as a regressive tax. None of the choices are correct.

Answer 1

Answer- Option 3 ( an example of regressive tax is an excise tax )

Explanation- Option 3 is correct because an excise tax is a tax imposed on each item sold. Excise tax earn higher percentage.

Regressive tax is a burden on poor as it decreases as income increases. As per wealthier people pay less tax. In the same manner excise tax on each sold item is much greater.

Other options are incorrect because

1-when tax rate is decreases as taxation income increases.

2- There are three types of taxes regressive, proportional and progressive. All are common.

4- Effective tax rate is average tax in nature.It is imposed on income . It doesn’t take account on sales tax so sales can not be viewed as regressive.