Question

A regressive tax is a tax that follows which of the following patterns as an individual's income increases:

• A. Charged at a decreasing rate
• B. Charged at an increasing rate
• C. Charged at a flat percentage of the individual's income
• D. None of these

Hint:

Understand tax types by their relationship between income and tax rate.
Regressive taxes affect the poor disproportionately by charging them higher rates relative to income.

Answer 1

The Correct Option is A

A regressive tax is one where the tax rate decreases as the individual's income increases. This means that lower-income people pay a higher percentage of their income in taxes than higher-income people.
Step 1: Tax systems
- Progressive tax: higher income, higher tax rate.
- Regressive tax: higher income, lower tax rate.
- Proportional (flat) tax: same rate for all incomes.
Step 2: Examples
Sales taxes and excise taxes are often regressive because they take a larger share from low-income individuals.
Hence, option (A) is the correct choice.