Progressive taxation reduces income inequality

Steps:

• Identify inequality as the gap between rich and poor incomes.
• Recall tax types: progressive (higher rates for higher incomes), proportionate (flat rate), indirect (on goods/services).
• Evaluate how each affects income distribution: progressive shifts burden to wealthy, reducing gaps.
• Select the tax that directly targets high earners to promote equity.

Why A is correct:

• Progressive income tax applies higher rates to larger incomes, redistributing wealth from rich to poor via government spending on social programs.

Why the others are wrong:

• B: Proportionate income tax charges the same rate regardless of income, maintaining inequality.
• C: Proportionate indirect tax (e.g., flat sales tax) burdens low-income groups more relative to earnings, increasing inequality.
• D: Specific indirect tax (fixed amount per unit) is regressive, hitting low earners harder proportionally.

Final answer: A