Which of the following best describes a progressive tax system?

• A. A tax system where the tax rate increases as income increases.
• B. A tax system where only goods and services are taxed.
• C. A tax system where everyone pays the same percentage of their income.
• D. A tax system where the tax rate decreases as income increases.

Answer: (A)

Verified step by step guidance

1. Understand the concept of a tax system and how tax rates can vary with income levels.
2. Recall that a progressive tax system is designed so that individuals with higher incomes pay a higher percentage of their income in taxes compared to those with lower incomes.
3. Compare the options given: identify which describes a tax rate that increases as income increases, which is the hallmark of a progressive tax system.
4. Recognize that a tax system where everyone pays the same percentage of their income is called a proportional tax system, and one where the tax rate decreases as income increases is a regressive tax system.
5. Conclude that the correct description of a progressive tax system is the one where the tax rate increases as income increases.