alleryStart learning →A tax that is proportional at low incomes but regressive above a wage limit describes the:
ACorporate income tax rate
BGasoline excise tax rate
CSocial Security payroll tax
DFederal income tax rate
Answer & Solution
Correct answer: C. Social Security payroll tax
1. One named tax changes classification partway up the scale.
2. The Medicare payroll tax is a proportional tax, a flat percentage of all wages.
3. The Social Security payroll tax is proportional up to the wage limit.
4. Above that level it becomes a regressive tax.
5. So it is the Social Security payroll tax that changes character.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 16 'Government Budgets and Fiscal Policy'_
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