Question:
The impact of a proportional income tax on the distribution of income is that it
(1) makes the distribution more equal.
(2) makes the distribution less equal.
(3) leaves the relative distribution unchanged.
(4) penalizes low-income earners more than high-income earners.
(5) eliminates income inequality completely.
Correct Answer:
(3)
Answer Explanation:
A proportional tax (flat tax) takes the exact same percentage of income from all taxpayers, regardless of their income level. Because it takes the same proportion from everyone, it leaves the relative distribution (or inequality ratio) between income groups unchanged.
Topic: Public Finance Year: 2019
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