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22 February, 10:25

A state's sale tax is 8%. This places a higher burden on low-income individuals. What type of tax system does this represent?

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  1. 22 February, 13:10
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    Answer: A Regressive Tax System

    Explanation: A Regressive Tax system is a system of taxation that puts a higher tax burden on low income earners while the high income earners pay a lower tax.

    Under this system of taxation, the low income earners are burdened with higher tax than the high income earners thereby making it difficult for them to invest. Once they are able to pay for food, clothes and shelter, they have little or nothing left for savings or investment.

    The low income earners in this type of tax system tend to live below the average living standard while the rich or high income earners live above the average living standard in that economy as they have more than enough to safe and invest.
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