Question : In which type of tax is the marginal tax rate higher than the average tax rate?
Option 1: Digressive
Option 2: Proportional
Option 3: Regressive
Option 4: Progressive
Correct Answer: Progressive
Solution : The correct option is Progressive .
In a progressive tax system, the marginal tax rate is higher than the average tax rate. As a taxpayer's income increases, they move into higher tax brackets where the rate applied to each additional dollar of income is higher than the rate applied to the previous bracket. This results in a situation where the marginal tax rate, or the tax rate applied to the last dollar earned, is higher than the average tax rate, which is the total tax paid divided by total income.
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