Which of the Following Statements Correctly Describes How Taxes Redistribute

question 35

Essay

Which of the following statements correctly describes how taxes redistribute income across different households in an economy?
A) The richest 40 percent of households increase their share of income.
B) The poorest 60 percent of households increase their share of income.
C) Taxes have no effect on the distribution of income.
D) The poorest 20 percent of households receive 20 percent of their income from the government.
E) The richest 20 percent of households increase their share of income and the poorest 20 percent decrease their share of income.

• A) The richest 40 percent of households increase their share of income.
• B) The poorest 60 percent of households increase their share of income.
• C) Taxes have no effect on the distribution of income.
• D) The poorest 20 percent of households receive 20 percent of their income from the government.
• E) The richest 20 percent of households increase their share of income and the poorest 20 percent decrease their share of income.

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Definitions:

Earning Revenue

The process of generating income through the sale of goods, provision of services, or other business activities.

Expenses

The costs incurred by a business in the process of earning revenue.

Managerial Accountants

Professionals who focus on providing the financial information necessary for management to make decisions regarding the planning, direction, and control of an organization.

Tax Reports

Documents prepared for the government that detail an entity's income, expenses, and other tax-related information for fiscal purposes.