Question

Suppose that gifts were taxed at a rate of $10\%$for amounts up to $\$100,000$and $20\%$for anything over that amount.

Would this tax be regressive or progressive?

Short answer

The tax would be Progressive.

Step-by-step solution

Step 1. Define tax.

A tax is a monetary payment made to the government in exchange for government services. Taxes are levied in almost every country on Earth, mostly to raise revenue for government spending, but they also serve other purposes.

Step 2. Would the tax be regressive or progressive?

The tax would be Progressive.

People who make larger or larger contributions, depending on whether they are subject to a higher or lower tax rate, usually have higher incomes. The income tax is a progressive tax, which means that tax rates rise or fall in proportion to a household's income. In a progressive tax system, taxes are estimated or calculated based on an individual's taxable income.