Which term describes the tax system where the average tax rate increases with income?

• A. Proportional Tax
• B. Savings
• C. Progressive Tax
• D. Credit Worthiness

Answer: (C)

Progressive tax means the average tax rate increases as income rises. In this setup, higher income is taxed more heavily because rates rise in higher income brackets, so your total taxes constitute a larger share of your earnings even if the rate on any single bracket is fixed. This differs from a proportional tax, where everyone pays the same percentage of their income and the overall rate stays the same as income changes. Savings and credit worthiness aren’t about how tax rates scale with income. So the term for a system where the average tax rate goes up with income is progressive tax.