Suppose that a country has a progressive income tax code, and taxable income is calculated in nominal terms but the schedule of income tax rates is NOT indexed to inflation. An individual whose income keeps up with inflation over time will pay:
A)the alternative minimum tax.
B)a lower percentage of income in taxes over time.
C)the same percentage of income in taxes over time.
D)a higher percentage of income in taxes over time.

Question

Quizplus · Accepted Answer

Since the income tax rates are not indexed to inflation, as time goes on, an individual whose income keeps up with inflation will earn more nominal income, which will push them into higher tax brackets. Therefore, they will end up paying a higher percentage of their income in taxes over time.

Suppose That a Country Has a Progressive Income Tax Code