Taxation

Self-Check Questions

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?

Hint:

Progressive. People who give larger gifts subject to the higher tax rate would typically have larger incomes as well.

If an individual owns a corporation for which he is the only employee, which different types of federal tax will he have to pay?

Hint:

Corporate income tax on his profits, individual income tax on his salary, and payroll tax taken out of the wages he pays himself.

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

Hint:

individual income taxes

The social security tax is 6.2% on employees’ income earned below $113,000. Is this tax progressive, regressive or proportional?

Hint:

The tax is regressive because wealthy income earners are not taxed at all on income above $113,000. As a percent of total income, the social security tax hits lower income earners harder than wealthier individuals.