Which of the following best describes the difference between a flat tax rate and a progressive tax rate?

• A. A flat tax rate increases as income rises, while a progressive tax rate remains constant for all income levels.
• B. A flat tax rate is determined by government spending, while a progressive tax rate is determined by market forces.
• C. A flat tax rate applies the same percentage to all income levels, while a progressive tax rate increases the percentage as income rises.
• D. A flat tax rate is only used for corporate taxes, while a progressive tax rate is only used for individual taxes.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a flat tax rate. A flat tax rate means that the same tax percentage is applied to all income levels, regardless of how much income a person earns.
2. Step 2: Understand the concept of a progressive tax rate. A progressive tax rate means that the tax percentage increases as the income level rises, so higher earners pay a larger percentage of their income in taxes.
3. Step 3: Compare the two tax systems by focusing on how the tax rate changes with income. The flat tax rate remains constant, while the progressive tax rate varies and increases with income.
4. Step 4: Evaluate the given answer choices by matching them with the definitions of flat and progressive tax rates. Identify which choice correctly describes the difference based on the behavior of the tax rates relative to income.
5. Step 5: Conclude that the correct description is the one stating that a flat tax rate applies the same percentage to all income levels, while a progressive tax rate increases the percentage as income rises.