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Difficulty: EasyTypes and Systems of Taxation

Which system of taxation takes a higher percentage of income from higher-income earners than from lower-income earners?

  1. Progressive tax systemAnswer
  2. B
    Regressive tax system
  3. C
    Proportional tax system
  4. D
    Specific tax system

Answer

Progressive tax system
In a progressive tax system, the rate of tax increases as the taxable income increases. Consequently, individuals with higher incomes pay a larger percentage of their total income in tax compared to those with lower incomes.

Step-by-Step Solution

1
Define the relationship between tax rate and income level.
Identify the system where the tax rate increases as income increases.
Tax systems are classified by how the tax rate changes relative to the taxpayer's income base.
2
Evaluate the definition against standard tax system types.
A system where high earners pay a higher proportion of income is defined as progressive taxation.
Progressive taxation is designed to reduce income inequality by scaling tax rates according to ability to pay.

Key Concept

Progressive Taxation
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Topics

Types and Systems of Taxation

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