Which tax is described as taking the same share of income at all income levels?

• A. Progressive tax
• B. Inflation rate
• C. Proportional tax
• D. Economic indicators

Answer: (C)

A proportional tax keeps the tax rate constant across all income levels, so everyone pays the same percentage of their income in taxes. This means the share of income paid in taxes doesn’t change as you move from lower to higher incomes. For example, at a 10% rate, a person earning $20,000 pays $2,000 and a person earning $100,000 pays $10,000; both are paying 10% of their income, even though the dollars differ. In contrast, a progressive tax raises the rate with higher incomes, giving higher earners a larger share of their income in taxes. Inflation rate and economic indicators aren’t taxes, so they don’t describe tax burden sharing.