U.S History Subject Test
147
ARCO
■ SAT II Subject Tests
w w w . p e t e r s o n s . c o m / a r c o
54. The correct answer is (C). A progressive tax is one for which the tax rates increase with ability to
pay. In a recent year, the federal government taxed the personal income of single persons at the
following rates:
Taxable Income
Tax Rate
Tax Liability
$10,000
15.04%
$1,504
$20,000
16.43%
$3,287
$30,000
20.29%
$6,087
$40,000
22.21%
$8,887
Notice that the tax rates increase as income increases. Thus, a person who has taxable income of
$40,000 pays a higher percentage of his or her income in taxes (22.21%) than a person who has
taxable income of $10,000 (15.04%).
By contrast, a person pays the same sales tax regardless of income. As a consequence, people
with lower incomes tend to spend a greater portion of their income in sales tax than people who are
wealthier. This type of tax is called a regressive tax. Similarly, an excise tax levied on the manufac-
ture, sale, or use of particular products, such as cigarettes or liquor, also taxes without regard to
ability to pay. So too property tax rates are fixed without regard to ability to pay. Finally, a poll tax
was a fee a voter had to pay before being allowed to cast a ballot. The poll tax is now unconstitutional.
55. The correct answer is (E). The balance of payments represents the difference between what a country
is owed by all other countries and what it owes. If a country owes more than it is owed, then the
country has a negative balance of payments. Any activity that causes money to flow out of a country
rather than in would tend to create a negative balance of payments. Notice that the activities de-
scribed by (A) through (D) do that. The activity mentioned by (E), however, brings money into the
country and would tend to improve the balance of payments.
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