A progressive tax system

Question

Quizplus · Accepted Answer

A progressive tax system means that the marginal tax rate increases as income increases. This is done to promote equity in the system, by taxing individuals who have a higher ability to pay at a higher rate. This also means that individuals have less incentive to earn additional income, as it will be taxed at a higher rate. However, this does not necessarily promote investment, as investment income may be taxed differently than earned income. Therefore, choices B and C are incorrect.  D is also incorrect, as a progressive system means higher marginal tax rates at higher income levels.

A Progressive Tax System