Question:
Which of the following policies is most likely to make a country’s income distribution more equitable?
(1) Establishing a general sales tax on food and clothing
(2) Establishing a progressive income tax system
(3) Eliminating excise taxes on luxury goods
(4) Proportionately decreasing the tax rate for all income groups
(5) Reducing the subsidy on education and health
Correct Answer:
(2)
Answer Explanation:
A progressive income tax system charges higher percentage rates to higher-income earners. This redistributes wealth and narrows the gap between the rich and the poor, making income distribution more equitable. Indirect taxes (like sales taxes) tend to be regressive and worsen inequality.
Topic: Income Inequality Year: 2022
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