Homework SourseGeorge and Thomas live in a society in which the first 10000
George and Thomas live in a society in which the first $10,000 of income is taxed at a rate of 10% while any income above $10,000 is taxed at a rate of 20%. George\'s income is $5,000, while Thomas\'s income is $20,000. This tax system is because .
| Progressive; while Thomas earns four times as much as George, he pays six times as much tax as George. |
Solution
ANSWER:
The correct answer is option d because:
tax given by george = 10% of 5,000 = 10% * 5,000 = $500
tax given by thomas = 20% of 20,000 = 20% * 20,000 = $4,000
the tax is progressive as thomas is earning more and is paying more tax while george earns less and pays less % tax and also thomas pays 8 times more tax then george as the ratio of tax paid by thomas to george = $4,000 / $500 = 8
