Question

For purposes of assessing income taxes, there are three official income levels for workers in a small country: high, medium, and low. For the last hour on the job during a 40-hour workweek, a high income worker pays a marginal income tax rate of 15 percent, a medium-income worker pays a marginal tax rate of 20 percent, and a low-income worker is assessed a 25 percent marginal income tax rate. Based only on this information, does this nation's income tax system appear to be progressive, proportional, or regressive?

Short answer

Nation's income tax system appear to be regressive.

Step-by-step solution

Step 1. Meanings

Tax rate-

The specific percentage at which any corporation or an individual is taxed is the tax rate.

Marginal tax rate-

The specific percentage of tax taxed on the last dollar earned of taxable income by a corporation or an individual is a marginal tax.

Step 2. Definitions 

Progressive tax— a tax system that takes lower percentage of tax rate from low-income groups than high-income groups.

Proportional tax— a tax System that takes the equal percentage of tax from all the income groups.

Regressive tax—a tax system that takes higher percentage of tax rate from low-income groups than high-income groups.

Step 3. Explanation 

For the last hour on the job during a 40-hour workweek-

A high-income individual pays a marginal income tax rate of 15 percent, while

a medium-income & low-income individuals pay the marginal tax rate of 20 percent and 25 percent respectively .

Based on the aforementioned information definitions Income Tax systems appear to be regressive Because ina regressivetax system that takes a higher percentage of the tax rate from low-income groups than high-income groups.