Question 33
Public FinanceA tax is defined as regressive if
- A.the proportion of income paid as tax increases as the income level increases
- B.all income groups pay the same percentage of their income as taxes
- C.the proportion of income taken by the tax falls as income increases
- 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.