Question : In a proportional tax system, if the tax rate is 10%, which of the following scenarios is correct?
Option 1: Individuals with higher incomes pay a higher dollar amount in taxes.
Option 2: Individuals with lower incomes pay a higher percentage of their income in taxes.
Option 3: Individuals with higher incomes pay the same percentage of their income in taxes as those with lower incomes.
Option 4: Individuals with lower incomes have to bear less burden of tax.
Correct Answer: Individuals with higher incomes pay the same percentage of their income in taxes as those with lower incomes.
Solution : The correct answer is (c) Individuals with higher incomes pay the same percentage of their income in taxes as those with lower incomes.
In a proportional tax system, also known as a flat tax system, the tax rate is applied uniformly to all individuals, regardless of their income. In this case, the tax rate is 10%, which means that everyone, regardless of their income, pays 10% of their income in taxes.
