Which term describes a tax where the burden is the same percentage of income for all?

Which term describes a tax where the burden is the same percentage of income for all?

• A. Progressive Tax
• B. Credit Worthiness
• C. Proportional Tax
• D. Bonds

Answer: (C)

This question focuses on how tax burden scales with income: a proportional tax applies the same percentage to everyone. In a proportional tax, the tax rate is constant regardless of how much someone earns, so the percentage of income paid remains the same for all taxpayers. The actual dollar amount paid, however, rises with income because there is more income to tax. For example, at a 10% rate, someone making $20,000 pays $2,000, while someone making $100,000 pays $10,000, yet both are paying the same 10% of their income. The other options don’t fit this idea. A progressive tax raises the rate as income increases, so the burden as a share of income grows with higher earnings. Creditworthiness is a measure used to assess the risk of lending, not a tax concept. Bonds are debt securities, not a tax structure. Thus the term that describes a tax where the burden is the same percentage of income for all is proportional tax.

This question focuses on how tax burden scales with income: a proportional tax applies the same percentage to everyone. In a proportional tax, the tax rate is constant regardless of how much someone earns, so the percentage of income paid remains the same for all taxpayers. The actual dollar amount paid, however, rises with income because there is more income to tax. For example, at a 10% rate, someone making $20,000 pays $2,000, while someone making $100,000 pays $10,000, yet both are paying the same 10% of their income.

The other options don’t fit this idea. A progressive tax raises the rate as income increases, so the burden as a share of income grows with higher earnings. Creditworthiness is a measure used to assess the risk of lending, not a tax concept. Bonds are debt securities, not a tax structure. Thus the term that describes a tax where the burden is the same percentage of income for all is proportional tax.