What type of income tax system is used by the United States?

• A. Flat tax
• B. Regressive tax
• C. Progressive tax
• D. Proportional tax

Answer: (C)

Income tax in the United States is a progressive tax. Rates rise as income increases, and tax is applied in brackets—each slice of income falls into a bracket with its own rate. So you pay a lower rate on the first portion of income and higher rates only on the portions that enter higher brackets. This creates a higher average tax rate as earnings grow, rather than taxing all income at one rate. A flat or proportional system would charge the same rate on all income, and a regressive approach would take a larger share from lower-income earners, which isn’t how federal income tax is structured.