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Consider the following statements regarding the differences between Proportional and Progressive taxation:
In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers.
As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
Consider the following statements regarding the differences between P...
- A proportional tax is an income tax system where the same percentage of tax is levied on all taxpayers, regardless of their income. A proportional tax applies the same tax rate across low, middle, and high-income taxpayers. Whereas, in progressive taxation is based on the taxable amount of an individual's income. They follow an accelerating schedule, so high-income earners pay more than low income earners. Tax rate, along with tax liability, increases as an individual's wealth increases. The overall outcome is that higher earners pay a higher percentage of taxes and more money in taxes than do lower-income earners. Hence statement 1 is correct.
- The proportional income tax acts as an automatic stabiliser – a shock absorber because it makes disposable income, and thus consumer spending, less sensitive to fluctuations in GDP as compared to progressive taxation. When GDP rises, disposable income also rises but by less than the rise in GDP because a part of it is siphoned off as taxes. This helps limit the upward fluctuation in consumption spending. Hence statement 2 is correct.
Most Upvoted Answer
Consider the following statements regarding the differences between P...
Differences between Proportional and Progressive Taxation:
Progressive Taxation:
- Tax rate increases with an increase in income.
- Higher income earners pay a larger percentage of their income in taxes.
- This leads to a more equal distribution of wealth.
- It may discourage people from earning higher incomes as they will be taxed at a higher rate.
- It makes disposable income more sensitive to fluctuations in GDP.
Proportional Taxation:
- Same percentage of tax is levied on all taxpayers.
- No matter the income level, everyone pays the same percentage of tax.
- It does not lead to a more equal distribution of wealth.
- It may not discourage people from earning higher incomes as they will be taxed at the same rate.
- It makes disposable income less sensitive to fluctuations in GDP.
Correct answer:
Both 1 and 2 are correct. Progressive taxation leads to higher tax rates for higher income earners and makes disposable income more sensitive to fluctuations in GDP. Proportional taxation, on the other hand, levies the same percentage of tax on all taxpayers and makes disposable income less sensitive to fluctuations in GDP.
Progressive Taxation:
- Tax rate increases with an increase in income.
- Higher income earners pay a larger percentage of their income in taxes.
- This leads to a more equal distribution of wealth.
- It may discourage people from earning higher incomes as they will be taxed at a higher rate.
- It makes disposable income more sensitive to fluctuations in GDP.
Proportional Taxation:
- Same percentage of tax is levied on all taxpayers.
- No matter the income level, everyone pays the same percentage of tax.
- It does not lead to a more equal distribution of wealth.
- It may not discourage people from earning higher incomes as they will be taxed at the same rate.
- It makes disposable income less sensitive to fluctuations in GDP.
Correct answer:
Both 1 and 2 are correct. Progressive taxation leads to higher tax rates for higher income earners and makes disposable income more sensitive to fluctuations in GDP. Proportional taxation, on the other hand, levies the same percentage of tax on all taxpayers and makes disposable income less sensitive to fluctuations in GDP.
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Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
Solutions for Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for UPSC.
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Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?, a detailed solution for Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? has been provided alongside types of Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Consider the following statements regarding the differences between Proportional and Progressive taxation: In progressive taxation, tax rate increases with an increase in the income whereas, in proportional taxation same percentage of tax is levied on all taxpayers. As compared to progressive taxation, proportional taxation makes disposable income less sensitive to fluctuations in GDP. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? tests, examples and also practice UPSC tests.
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