Suppose, on average, a family in Church Falls earning $60,000 per year paid 6 percent of its income in state taxes. A family earning $80,000 paid, on average, $4,760 in state income taxes
Are state taxes in Church Falls progressive or regressive? Be sure to explain the difference between a progressive tax and a regressive tax.
A regressive tax is a tax for which people with lower incomes pay a higher percentage of their income in tax than do people with higher incomes. A progressive tax is a tax for which people with lower incomes pay a lower percentage of their income in tax than do people with higher incomes. If a family earning $80,000 paid $4,760 in taxes, then the average tax rate at this income level is $4,760 รท $80,000 = 5.95%. This means people with lower incomes pay a slightly higher percentage of their income in state taxes than do people with higher incomes. Therefore, the state tax in Church Falls is regressive.
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