The Mythical Country of Woodland Imposes Two Taxes: Worker Tax

question 114

Multiple Choice

The mythical country of Woodland imposes two taxes: Worker tax: Employers withhold ten percent of all wages and salaries. If taxable income as reported on the employee's income tax return is greater than $40,000, an additional 5% tax is levied on all income. Business tax: All businesses pay a tax on invested capital based on a valuation formula. The tax computed for three different amounts of invested capital is provided below: According to the definitions in the text: I. The worker tax is a regressive tax rate structure. II. The business tax is a progressive tax rate structure. III. The worker tax is a progressive tax rate structure. IV. The business tax is a regressive tax rate structure.

• A) Statements I and III are correct.
• B) Statements II and III are correct.
• C) Only statements III is correct.
• D) Statements I and IV are correct.
• E) Statements III and IV are correct.

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