Chapter 16.4, Problem 4R

To determine

To ascertain an argument that a wealthy person might make against the progressive income tax.

Explanation of Solution

The federal income tax in the US is a progressive form of taxation. The marginal rate of tax system imposes a higher rate of income tax on those with higher incomes, and lower rate of income tax on those with lower income. The rate of percentage changes at intervals as taxable earnings rise.

The wealthy person might used some strategy for skipping of paying some progressive income tax by transferring their wealth to their children and investing in some other assets etc.

Economics Concept Introduction

Introduction: A progressive form of taxation process decreases the burden of tax on those who can afford to pay the least. Another advantage of progressive taxation is that government collects a decent amount of revenue since, in normal taxation, many middle and lower class people do not pay taxes because of higher rates but because of lower income tax levels.