The table below shows the annual income and the total annual tax paid by four households in a hypothetical economy:
| Household | Annual Income | Total Tax Paid |
|---|---|---|
| W | £20,000 | £4,000 |
| X | £40,000 | £7,200 |
| Y | £80,000 | £12,800 |
| Z | £160,000 | £22,400 |
Which of the following statements correctly describes this tax system?
It is a progressive tax because both household income and the absolute amount of tax paid increase.
It is a proportional tax because the increase in tax paid is directly linked to the increase in household income.
It is a regressive tax because the proportion of income paid in tax decreases as household income increases.
It is a regressive tax because higher-income households pay a smaller absolute amount of tax than lower-income households.
245 exam-style questions on AQA A Level Economics 2.5 Fiscal policy and supply-side policies, covering 2.5.1 Fiscal policy and 2.5.2 Supply-side policies. Each one has a worked solution and a mark scheme showing where the marks go.