Question

State whether the following statements are true or false. Give reasons.
An increase in the rate of tax with an increase in income is called proportional tax.

• A. True
• B. False

Answer 1

The correct option is B False

Tax systems fall into three main categories within the tax code: regressive, proportional and progressive taxes. A proportional tax system, also referred to as a flat tax system, assesses the same tax rate regardless of income or wealth. It is meant to create equality between marginal tax rate and average tax rate paid. It is the one that imposes the same relative burden on all taxpayers—I.e., where tax liability and income grow in equal proportion. So the given statement is false.