If Stephen Earns $100,000 This Year and Pays $20,000 in Taxes

question 48

Multiple Choice

If Stephen earns $100,000 this year and pays $20,000 in taxes and Chris earns $50,000 this year and pays $5,000 in taxes, this tax system would appear to be

• A)​progressive.
• B)​proportional.
• C)​regressive.
• D)​none of the above

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Definitions:

Cost Method

An accounting method used to value certain investments at their original purchase cost, less any impairments.

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument, as stated by the issuing company.

Deductible Expenses

Expenses that can be subtracted from gross income, reducing the amount of income subject to taxation.