If George earned $50,000 and was taxed $7,500, while Julia earned $80,000 and was taxed $9,000, what type of income tax structure exists in their country?

Question

progressive income tax

regressive income tax

proportional income tax

not clear due to missing information

Answer 1

To determine the type of income tax structure in their country, we can analyze the tax burden relative to income for both George and Julia.

1. George's Tax Burden:

   • Income: $50,000
   • Tax Paid: $7,500
   • Effective Tax Rate = Tax Paid / Income = $7,500 / $50,000 = 0.15 or 15%

2. Julia's Tax Burden:

   • Income: $80,000
   • Tax Paid: $9,000
   • Effective Tax Rate = Tax Paid / Income = $9,000 / $80,000 = 0.1125 or 11.25%

Now, let’s analyze the effective tax rates:

• George has an effective tax rate of 15%.
• Julia has an effective tax rate of 11.25%.

Since George has a higher effective tax rate than Julia despite earning less, this indicates that as income increases, the rate of taxation decreases.

This situation corresponds to a regressive income tax structure, where higher earners pay a lower percentage of their income in taxes compared to lower earners.

Thus, the answer is regressive income tax.