Which of the following best describes tax progressivity?

• A. The tax rate increases as an individual's income increases.
• B. The tax rate decreases as an individual's income increases.
• C. Taxes are only levied on goods and services, not on income.
• D. Everyone pays the same amount of tax regardless of income.

Answer: (A)

Verified step by step guidance

1. Understand the concept of tax progressivity: it refers to how the tax rate changes relative to an individual's income.
2. Recall that a progressive tax system means that as a person's income increases, the percentage of income paid in taxes (the tax rate) also increases.
3. Contrast this with other tax systems: a regressive tax means the tax rate decreases as income increases, and a proportional tax means everyone pays the same tax rate regardless of income.
4. Evaluate each option by comparing it to the definition of tax progressivity to identify which one correctly describes it.
5. Conclude that the correct description of tax progressivity is: 'The tax rate increases as an individual's income increases.'