Myschool CBT Challenge Season 6 - Cash Prize Of N200,000 To Be Won!

The judgment concerning whether a tax is regressive, proportional, or progressive is based on a...

The judgment concerning whether a tax is regressive, proportional, or progressive is based on a comparison of the amount of tax with the
a. Distribution of income
b. Tax base
c. Taxpayer’s income
d. Value of the item being taxed?

To get notifications when anyone posts a new answer to this question,
Follow New Answers

Post an Answer

Please don't post or ask to join a "Group" or "Whatsapp Group" as a comment. It will be deleted. To join or start a group, please click here

Answers (2)

isaaq
4 months ago
Answer C) Taxpayer’s income
Proportional, progressive, and regressive taxes. Taxes can be distinguished by the effect they have on the distribution of income and wealth. A proportional tax is one that imposes the same relative burden on all taxpayers—i.e., where tax liability and income grow in equal proportion.
Gaby
4 months ago
Taxes can be distinguished by the
effect they have on the distribution of
income and wealth. A proportional
tax is one that imposes the same
relative burden on all taxpayers—i.e.,
where tax liability and income grow
in equal proportion. A progressive tax
is characterized by a more than
proportional rise in the tax liability
relative to the increase in income, and
a regressive tax is characterized by a
less than proportional rise in the
relative burden. Thus, progressive
taxes are seen as reducing
inequalities in income distribution,
whereas regressive taxes can have
the effect of increasing these
inequalities.
The taxes that are generally
considered progressive include
individual income taxes and estate
taxes. Income taxes that are nominally
progressive, however, may become
less so in the upper-income
categories—especially if a taxpayer is
allowed to reduce his tax base by
declaring deductions or by excluding
certain income components from his
taxable income. Proportional tax rates
that are applied to lower-income
categories will also be more
progressive if personal exemptions
are declared.
Income measured over the course of
a given year does not necessarily
provide the best measure of
taxpaying ability. For example,
transitory increases in income may be
saved, and during temporary declines
in income a taxpayer may choose to
finance consumption by reducing
savings. Thus, if taxation is compared
with “permanent income,” it will be
less regressive (or more progressive)
than if it is compared with annual
income.
Sales taxes and excises (except those
on luxuries) tend to be regressive,
because the share of personal income
consumed or spent on a specific
good declines as the level of personal
income rises. Poll taxes (also known
as head taxes), levied as a fixed
amount per capita, obviously are
regressive.
It is difficult to classify corporate
income taxes and taxes on business
as progressive, regressive, or
proportionate, because of uncertainty
about the ability of businesses to shift
their tax expenses (see below Shifting
and incidence). This difficulty of
determining who bears the tax
burden depends crucially on whether
a national or a subnational (that is,
provincial or state) tax is being
considered.
In considering the economic effects
of taxation, it is important to
distinguish between several concepts
of tax rates. The statutory rates are
those specified in the law; commonly
these are marginal rates, but
sometimes they are average rates.
Marginal income tax rates indicate the
fraction of incremental income that is
taken by taxation when income rises
by one dollar. Thus, if tax liability rises
by 45 cents when income rises by
one dollar, the marginal tax rate is 45
percent. Income tax statutes
commonly contain graduated
marginal rates—i.e., rates that rise as
income rises. Careful analysis of
marginal tax rates must consider
provisions other than the formal
statutory rate structure. If, for
example, a particular tax credit
(reduction in tax) falls by 20 cents for
each one-dollar rise in income, the
marginal rate is 20 percentage points
higher than indicated by the statutory
rates. Since marginal rates indicate
how after-tax income changes in
response to changes in before-tax
income, they are the relevant ones for
appraising incentive effects of
taxation. It is even more difficult to
know the marginal effective tax rate
applied to income from business and
capital, since it may depend on such
considerations as the structure of
depreciation allowances, the
deductibility of interest, and the
provisions for inflation adjustment. A
basic economic theorem holds that
the marginal effective tax rate in
income from capital is zero under a
consumption-based tax.
Average income tax rates indicate the
fraction of total income that is paid in
taxation. The pattern of average rates
is the one that is relevant for
appraising the distributional equity of
taxation. Under a progressive income
tax the average income tax rate rises
with income. Average income tax
rates commonly rise with income,
both because personal allowances are
provided for the taxpayer and
dependents and because marginal tax
rates are graduated; on the other
hand, preferential treatment of
income received predominantly by
high-income households may swamp
these effects, producing regressivity,
as indicated by average tax rates that
fall as income rises.
Ask Your Own Question

Quick Questions

See More Economics Questions