Mr. Bala’s income is $800.00 per month while that of Mr. Jatau is $1,200.00. If Messrs. Bala and Jtau pay $80.00 and $120.00 respectively as taxes, the tax ...

Answer Details

Based on the given information, Mr. Bala's tax rate is 10% of his income ($80.00 ÷ $800.00 = 0.10 or 10%), while Mr. Jatau's tax rate is also 10% of his income ($120.00 ÷ $1,200.00 = 0.10 or 10%). A tax system is considered progressive if the tax rate increases as income increases. In this case, since both Mr. Bala and Mr. Jatau pay the same tax rate of 10%, regardless of their income levels, the tax system is proportional. A proportional tax system means that the tax rate remains the same regardless of the taxpayer's income level. This is also known as a flat tax. In contrast, a regressive tax system means that the tax rate decreases as income increases, and an ad-valorem tax is a tax that is based on the value of a good or service, rather than a person's income.