RAS question
Progressive taxation means:
Correct answer: (C) Higher income groups pay higher percentage of tax.
Progressive taxation means higher-income groups pay a higher percentage of their income as tax than lower-income groups.
Explanation
Progressive taxation is based on the idea that tax liability should rise with ability to pay. The cited IRS lesson defines a progressive tax as one that takes a larger percentage of income from high-income groups than from low-income groups, and illustrates it with rates such as 10 percent for low-income taxpayers, 15 percent for middle-income taxpayers and 30 percent for high-income taxpayers. That is why option C captures the concept: the tax rate itself increases across income groups. The existing example of India's income-tax slabs, running from 0% to 30% under the new regime, follows the same principle: higher income is taxed at higher rates, which supports equity and helps reduce income inequality.
Why the other options are wrong
- (A) If everyone pays the same percentage, the tax is proportional, not progressive, because the rate does not rise with income.
- (B) If lower-income groups pay more, the burden moves in the opposite direction from progressive taxation and becomes regressive.
- (D) A system in which no one pays taxes is not a form of taxation at all, so it cannot describe progressive taxation.
Concept
This tests the public-finance idea of progressive, proportional and regressive taxation. It recurs in RAS because tax structure, equity and income inequality are core themes in Indian Economy questions.