Question:
A tax system is considered ‘progressive’ when:
(1) The marginal tax rate decreases as income increases.
(2) The average tax rate remains constant as income increases.
(3) The average tax rate increases as income increases.
(4) The total tax paid decreases as income increases.
(5) Everyone pays the same amount of tax regardless of income.
Correct Answer:
(3)
Answer Explanation:
Progressivity is defined by the rate. If the percentage of income paid in tax rises as income rises (e.g., rich pay 30%, poor pay 10%), it is a progressive tax, designed to reduce income inequality.
Topic: Public Finance Year: 2024
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