Question

X. Why is the personal income tax considered to be one of the main features of our modern economy that helps ensure against a repeat performance of the Great Depression?

Answer 1

Personal income tax consider to be one of the main features of our modern economy because income tax is progressive tax.progeressive income tax heighten the degree of automatic stabilization provided by income tax.With progressive income tax ,an income shock is met by a more than proportional changes in taxes.If income is drop in response to shock then average marginal tax rate in a progressive income tax will also drop .hence consumer net disposable income will also drop.lower income means lower tax payment in income tax.