Multiple choice

If the tax rate increases with the higher level of income, it shall be called

  1. proportional tax

  2. progressive tax

  3. lump sum tax

  4. regressive tax

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A progressive tax is defined as a tax where the tax rate increases as the taxable income increases, meaning higher-income earners pay a higher percentage of their income in taxes. Proportional taxes keep the rate constant, and regressive taxes take a larger percentage from lower incomes.