Examine the four different companies in the table, which shows their yearly income and their tax rate. Which type of taxation does this table best represent?
| | Total income | Tax rate |
| :------ | :----------- | :------- |
| Company A | $50 million | 10% |
| Company B | $100 million | 10% |
| Company C | $150 million | 10% |
| Company D | $200 million | 10% |
A. Indirect
B. Regressive
C. Progressive
D. Proportional
Answer (2)
Calculate the tax amount for each company.
Observe that the tax rate is constant at 10% for all companies.
Conclude that the table represents a proportional tax system.
The correct answer is D. Proportional. D
Explanation
Understanding the Problem The table provides the yearly income and tax rate for four companies. We need to determine which type of taxation the table best represents. The options are indirect, regressive, progressive, and proportional.
Calculating Tax Amounts Let's calculate the tax amount for each company:
Company A: Income = $50 million Tax rate = 10% Tax amount = $50 million * 0.10 = $5 million
Company B: Income = $100 million Tax rate = 10% Tax amount = $100 million * 0.10 = $10 million
Company C: Income = $150 million Tax rate = 10% Tax amount = $150 million * 0.10 = $15 million
Company D: Income = $200 million Tax rate = 10% Tax amount = $200 million * 0.10 = $20 million
Analyzing the Relationship Now, let's analyze the relationship between income and tax rate. We observe that the tax rate is constant at 10% for all companies, regardless of their income. This means that as income increases, the tax amount also increases, but the tax rate remains the same.
Identifying the Type of Taxation Based on this analysis, we can conclude that the table represents a proportional tax system. In a proportional tax system, the tax rate is the same for all income levels.
Final Answer Therefore, the correct answer is D. Proportional.
Examples
Imagine a small town where everyone pays the same percentage of their income in property taxes to fund local schools and infrastructure. Whether a household earns $30,000 or $300,000, they contribute 2% of their income. This ensures that everyone contributes fairly based on their ability to pay, maintaining essential community services. This is an example of proportional tax.
The taxation system represented in the table is a proportional tax system, where each company pays a constant tax rate of 10% regardless of their income level. This means that the tax rate applied is the same for all companies, indicating that the correct answer is D. Proportional.
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