Chapter11: Fiscal Policy And The Federal Budget
Section11.4: Supply Side Fiscal Policy
Problem 2ST
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Question
On what basis are taxes levied?
Expert Solution
Step 1
On the basis of levying of taxes, they can be classified into 3 categories:
- Proportional Tax: This tax imposes the same percentage of tax on everyone regardless of this income. Therefore, as the income of a person goes up or down, the percentage of income that is paid in the form of taxes does not change.
- Progressive tax: This tax levies a higher percentage of tax on those who earn higher income. Therefore, The percentage of the income that is paid in taxes goes up as the income goes up.
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