Question

Give two merits of a progressive tax system.

Answer 1

Two merits of a progressive tax system are-

1. Progressive taxes are equitable because rich people pay more taxes as they have a greater ability to pay. Rich people are taxed at a higher rate than the poor because of the ability to pay off the former increases as their incomes rise.

2. As progressive taxes are based on the ability to pay principle, it tends to reduce disparities in the distribution of income and wealth.