JAMB Economics 1989 Question 33

Question 33

Public Finance

A tax is defined as regressive if

  1. A.the proportion of income paid as tax increases as the income level increases
  2. B.all income groups pay the same percentage of their income as taxes
  3. C.the proportion of income taken by the tax falls as income increases
  4. D.the proportion of income taken by the tax is a fixed nominal amount of income for all income groups.
Show the answer and explanation

Answer: C (the proportion of income taken by the tax falls as income increases)

Explanation

A regressive tax takes a smaller share of income as income rises, so it weighs more heavily on the poor.