pg5 - regressive Arnold counters that the sales tax is a...

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regressive. Arnold counters that the sales tax is a flat tax. Who is correct? Arnold and Lillyare both correct. A sales tax by definition is a proportional tax – i.e., as taxable purchases increase, the sales tax rate (i.e., the marginal tax rate) remains constant. For this reason, Arnold is correct. Nonetheless, when you consider that the proportion of one’s total income spent on taxable purchases likely decreases as total income increases, the sales tax may be considered a regressive tax. For this reason, Lilly is correct. (15) [LO4] Which is the largest tax collected by the U.S. government? What types of taxpayers are subject to this tax? The federal income tax is the largest tax collected by the U.S. government. Currently, federal income taxes are levied on individuals, corporations, estates, and trusts. (16) [LO4] What is the tax base for the Social Security and Medicare taxes for an employee or employer? What is the tax base for Social Security and Medicare taxes for a self-employed individual? Is the self-employment tax in addition to or in lieu of federal income tax?
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