In political economy, what defines a 'progressive tax system'?
Answer and explanation
Correct answer: A. tax rate increases as taxable income rises
- Step 1: A progressive tax system assesses higher percentage tax rates on individuals with higher incomes. This structure is founded on the principle of ability to pay, aiming to reduce income inequality through redistributive fiscal policy. Answer: tax rate increases as taxable income rises. Why not the others: "every citizen pays the identical dollar amount" describes a regressive lump-sum poll tax rather than a progressive income tax system; "lower-income households pay higher rates" defines a regressive tax (such as flat sales taxes, which consume higher proportions of low incomes); "corporations are totally exempt from taxes" describes a tax haven policy rather than a progressive taxation model.
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