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Honor Economics Practice Exam

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A tax by which the government takes the same share of income from everyone.
Correct Answer:
Proportional Tax
Explanation:
A proportional tax applies the same percentage rate to all income levels. That means the burden is a constant share of income, not a fixed amount. For example, with a flat 10% rate, a person earning $20,000 pays $2,000 and someone earning $200,000 pays $20,000—the tax grows with income but the portion of income taxed stays steady. This contrasts with progressive taxes, where the rate increases with higher income, and regressive taxes, where the rate effectively falls as income rises. The other terms—savings, investment, and credit worthiness—are financial concepts unrelated to how a tax is structured, so they don’t describe a tax that takes the same share of income from everyone.

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