Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A tax where all individuals pay the same amount regardless of income
B
A tax that increases with an individual's income level
C
A tax that is only applicable to corporations
D
A tax that is based on the value of property owned
Understanding the Answer
Let's break down why this is correct
Answer
A lump-sum tax is a fixed amount that everyone pays, regardless of their income or financial situation. This means that whether someone earns a lot of money or just a little, they will still pay the same set amount. In contrast, a progressive tax system charges higher rates to those who earn more money, so wealthier individuals pay a larger percentage of their income in taxes. For example, if a lump-sum tax is $1,000, both a millionaire and a person earning minimum wage would pay that same $1,000, while in a progressive system, the millionaire might pay $10,000 or more based on their income. Overall, the key difference is that a lump-sum tax treats everyone equally, while a progressive tax takes into account each person's ability to pay.
Detailed Explanation
A lump-sum tax means everyone pays the same amount. Other options are incorrect because Some might think that a tax should go up as income goes up; It's a common mistake to think only businesses pay certain taxes.
Key Concepts
comparison to progressive tax systems
examples of lump-sum taxes
Topic
Lump-Sum Taxes Explained
Difficulty
medium level question
Cognitive Level
understand
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