WBCS.LIVE practice question

What specific defining characteristic constitutes a progressive tax system in macroeconomics?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. The tax rate decreases as the taxable income increases.
  2. The tax is levied equally on all citizens regardless of wealth.
  3. The tax rate remains completely constant regardless of income.
  4. The tax rate increases as the taxable income increases.

Correct answer and explanation

Correct answer: The tax rate increases as the taxable income increases.

Explanation: āœ… Correct Answer: D) The tax rate increases as the taxable income increases. šŸ“š Explanation: In a structurally progressive tax system, the marginal tax rate inherently increases as the taxpayer's taxable income or total wealth increases. This mechanism deliberately places a proportionally heavier financial burden on higher-income earners while offering essential financial relief to low-income individuals. The standard personal income tax structure utilized in India is a classic example of a progressive taxation model designed explicitly to reduce wealth inequality.