Question

Imagine you live in a society with progressive taxation. Your friend makes half of your salary and pays 20 percent in income taxes. Which rate most likely would be your income tax rate?

A) 2%
B) 10%
C) 20%
D) 40%

Answer 1

A progressive tax means that the more you earn, the higher is the percentage of the taxes that you need to pay: this prevents poverty and supports an equal distribution of wealth.

So if you make more than your friend, you need to also pay more. Only 40% is more, so the correct answer is D)!

Answer 2

The correct answer is D) 40%. Progressive tax refers to the tax brackets people fall in and how they tax those brackets. Those with a lower rate of tax have a lower income than those with a higher income do with a higher tax rate. Due to them imposing a higher tax rate on those with a higher income level, the answer D 40%, is the only percentage tax rate that is higher than 20%.