Is the individual income tax progressive or regressive?

• A. Regressive
• B. Progressive
• C. Flat
• D. Proportional

Answer: (B)

The main idea is how tax rates relate to how much someone earns. An individual income tax that is progressive imposes higher rates as income increases, so people with higher salaries pay a larger share of their income in taxes than those with lower salaries. This happens because the tax uses brackets that raise the marginal rate for income above certain thresholds, which raises the overall, or effective, tax rate as income grows. For example, someone earning much more will have portions of their income taxed at higher rates, leading to a bigger percentage of their income going to taxes than someone earning less. That increasing effective tax rate with income is the hallmark of a progressive system. In contrast, a regressive tax takes a larger share from lower earners, and a flat or proportional system taxes everyone at the same rate. So, the individual income tax is progressive.