Q. Consider the following statements regarding the concept of Progressive Tax System:

1. Progressive tax is harsher on the poor sections of the society
2. In Progressive tax, average tax rate is less than the marginal tax rate

Which of the above statements is / are correct?
Answer: Only 2 is correct
Notes: A progressive tax system imposes a greater tax rate as income increases, thus easing the burden on poorer sections; hence, statement 1 is incorrect. In progressive taxation, marginal tax rates exceed average tax rates, validating statement 2. Therefore, only statement 2 is correct, aligning with the essential feature of progressive tax systems.