NAME:
Worksheet
Applying Progressive Taxes
ACTIVITY 1
Complete the progressive tax chart below. To find the amount of tax, use this formula:
Income X percent of income paid in tax = amount of tax.
Example: $25,000 X .15 (15%) = 3,750
Income
$5,000
$50,000
$100,000
$150,000
$350,000
Progressive Tax
Percentage of Income
Paid in Tax
10%
25%
28%
33%
35%
Amount of Tax
ACTIVITY 2
Answer the following questions:
1. What might happen if the wealthiest taxpayers were taxed at a rate as high as 60 percent?
ANSWER:
2. What might happen to the nation’s economy if businesses were taxed at a very high rate?
ANSWER:
NAME:
Worksheet
Applying Regressive Taxes
Key Terms
Regressive tax—A tax that takes a larger percentage of income from low-income groups than from highincome groups.
Summary
A regressive tax is a fixed amount of money paid by each individual or household. In a regressive tax, the
percentage rate decreases as the amount being taxed increases. User fees are often considered regressive
because they take a larger percentage of income from low-income groups than from high-income groups.
Activity 1
1. If this regressive tax were used as an income tax, which group of people would pay the highest
percentage rate of taxes and which would pay the lowest?
ANSWER:
2. Cory works at a fast-food restaurant. He makes $10,000 a year. How much would he take home
after paying this regressive income tax? How much would his boss, who makes $25,000, take
home?
ANSWER
3. Marta was making $45,000. She just got a $5,000 raise. Under the regressive tax shown in the
chart, would the share of her income that she pays in taxes increase or decrease? What percent
would she be paying after the raise?
ANSWER
NAME:
Activity 2
Make a chart similar to the one shown in Activity 1for the tax amount of $3,000. Then answer the questions
that follow. (To find the percent of income paid in tax, divide the amount of tax by the income; for
example, $3,000 ÷ $50,000 = .06 or 6 percent.).
INCOME
Regressive Tax ($3,000 Per Person)
Percent of Income Paid in
Taxes
Amount of Taxes
$5,000
$10,000
$25,000
$50,000
$100,000
1. Which income level would suffer most under such a tax?
ANSWER:
2. Which income level would hardly notice the loss of $3,000?
ANSWER:
3. Would it be better if the United States used a Regressive Tax for collecting Income Tax? Explain
your answer.
ANSWER:
Activity 3
Do fixed fees have a place in the larger tax system? For example, states require fees for driver’s licenses. Is
such a fee regressive? Is it fair to all income levels?
Write a short answer below explaining your opinion on this fee placed on drivers.
NAME:
Worksheet
Applying Proportional Taxes
Key Terms
flat tax—Another term for a proportional tax.
proportional tax—A tax that takes the same percentage of income from all income groups.
regressive tax—A tax that takes a larger percentage of income from low-income groups than from highincome groups.
sales tax—A tax on retail products based on a set percentage of retail cost.
Summary
With a proportional or flat tax, each individual or household pays the same fixed rate. For example, lowincome taxpayers would pay 10 percent, middle-income taxpayers would pay 10 percent, and high-income
taxpayers would pay 10 percent. The sales tax is an example of a proportional tax because all consumers,
regardless of income, pay the same fixed rate. Although individuals are taxed at the same rate, flat taxes
can be considered regressive because a larger portion of income is taken from those with lower incomes.
For example, a 6% sales tax on a $1000 computer ($60) would take a greater portion of a $10,000 income
than of a $50,000 income.
Activity 1
Complete the proportional tax chart below. To find the amount of tax, use this formula: Income ×
percentage of income paid in tax = amount of tax. Example: $15,000 × .10 (10%) = $1,500.
INCOME
$5,000
$10,000
$25,000
$50,000
$100,000
PROPORTIONAL TAX
Percent of Income Paid in
Taxes
10%
10%
10%
10%
10%
Amount of Taxes
Activity 2
The Armey-Shelby flat tax proposal is also based on a 17 percent rate. The Armey-Shelby tax, however,
applies that rate only on income over $35,400 for a family of four. In other words, if the family made
$50,000, they would be taxed on $14,600 ($50,000−$35,400).
1. How is the attempt to exempt a certain amount from the tax a way to make the tax less regressive?
ANSWER:
2. Using the Armey-Shelby tax exemption of $35,400, how much tax would a family of four earning
$25,000 pay in taxes?
ANSWER: