Question

What taxes would an individual pay if he were self-employed and the business is not incorporated?

Short answer

A regressive tax is one that imposes a $6.2$ percent social security tax on employees earning less than $\$1,13,000$ per year.

Step-by-step solution

Concept introduction.

Progressive taxation: The tax structure is said to have been progressive when marginal rates are greater for higher-income earners and decrease for lower-income people.
Regressive taxation: The tax regime is said to have been regressive when tax rate rates are down for higher-income earners and greater for lower-income folks.

Proportional taxation: The tax regime is said to have been proportionate when income tax rates are the same for all income brackets.

Social security tax: To finance state welfare programs, businesses and employees must pay a state welfare levy.

Explanation of solution.

A $6.2$percent social security levy on those earning less than $\$1,13,000$is a kind of regressive taxation. The tax regime is said to be regressive when tax rate rates are down for higher-income earners and greater for lower-income people. Because individuals with incomes exceeding $\$1,13,000$ are exempt from paying the social security tax, only those with lesser incomes are required to pay it. A regressive tax is one that imposes a $6.2$ percent social security tax on employees earning less than $\$1,13,000$ per year.