Question

True or False :

The type of tax that is most effective is Progressive. People of higher income levels will pay more and lower income individuals are not impacted at all. Identify wheth er you believe the above statement is True or False . Provide an explanation to support your answer. Your explanation should include definitions for any terms used from this section. Make sure to consider the entire statement in your answer .

Answer 1

The above statement is True. A progressive tax ia type of taxation under which the marginal tax rate increases with increase in the taxable income. Thus we can say that when the income levels rises, the tax rate increases upto a certain standard bracket. Now it is said that it does not affect the poor or the other low income groups because the tax rate varies in accordance to the income, thus it safeguards the interests of this group by keeping more money in there pockets, some critics also comment that the progressive taxation is discriminatory against the high income groups. The idea behind progressive tax is that people with higher income should contribute more towards the development of society, social work etc.