Which of the following is an example of a progressive tax?

A. The excise tax on cigarettes

B. The federal tax on gasoline

C. The federal personal income tax

D. All of the above answers are correct

Answer: C. The federal personal income tax

A tax that increases in rate as the taxable amount increases is known as a progressive tax. Progressive taxes can be applied to a general tax system as a whole or on individual taxes. In order to reduce the tax incidence of people most likely not to pay, progressive taxes are imposed.

The federal income tax system is a good example of a progressive tax. In this case, you are taxed at higher rates as your income or the amount you earn increases. The opposite of progressive tax is regressive tax and in this case, the poor pay a bigger proportion of their total income compared to the rich. Generally, the tax structure of progressive taxation reduces inequality and mitigates many ills of society associated with income inequality.

Economics

2 years ago

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