Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They vary with income levels
B
They are fixed amounts regardless of income
C
They increase as income increases
D
They are only applied to high-income earners
Understanding the Answer
Let's break down why this is correct
Answer
A lump-sum tax is a fixed amount of money that everyone pays, regardless of their income or wealth. This means that the tax does not change based on how much a person earns, so it has a marginal tax rate of zero. In other words, if you earn more money, you still pay the same amount in taxes as someone who earns less. For example, if everyone pays $500 each year as a lump-sum tax, it doesn’t matter if someone makes $30,000 or $100,000; they both pay $500. This makes lump-sum taxes simple and easy to understand, but it can be seen as unfair since it can take a larger percentage of income from those who earn less.
Detailed Explanation
Lump-sum taxes are the same amount for everyone. Other options are incorrect because Some might think these taxes change with income; It's a common mistake to think these taxes go up with income.
Key Concepts
marginal tax rates
Topic
Lump-Sum Taxes Explained
Difficulty
easy level question
Cognitive Level
understand
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