Question

Under a progressive tax rate system, the applicable tax rate:

a. is applied against the taxpayer's net holdings of tangible assets.
b. decreases as the tax base grows larger.
c. increases as the tax base grows larger.
d. is independent of the tax base.

Answer 1

In a progressive tax rate system, the tax rate increases as the tax base grows larger, meaning higher earners pay a higher percentage of their income in taxes.

Step-by-step explanation:

Under a progressive tax rate system, the applicable tax rate increases as the tax base grows larger. This implies that individuals and entities with higher income brackets pay a larger percentage of their income in taxes compared to those in lower brackets. For instance, a person earning between $50,000 and $80,000 might be taxed at a rate of 20%, while another earning between $300,000 and $1,000,000 would face a tax rate of 35%.