Question
Personal income taxes have progressive rates and generate what kind of increases in tax revenues as GDP expands?
Multiple choice question.
Proportionate
More-than-proportionate
Less-than-proportionate
Not enough information to determine
Multiple choice question.
Proportionate
More-than-proportionate
Less-than-proportionate
Not enough information to determine
Answers
GPT-4o mini
The correct answer is **More-than-proportionate**.
In a progressive tax system, as income (and consequently GDP) increases, higher income earners pay a larger percentage of their income in taxes compared to lower income earners. This means that tax revenues increase at a rate that is greater than the rate of GDP growth, leading to more-than-proportionate increases in tax revenues as GDP expands.
In a progressive tax system, as income (and consequently GDP) increases, higher income earners pay a larger percentage of their income in taxes compared to lower income earners. This means that tax revenues increase at a rate that is greater than the rate of GDP growth, leading to more-than-proportionate increases in tax revenues as GDP expands.