Which statement about Tax Base is true?

Which statement about Tax Base is true?

• A. The portion of income that is untaxed
• B. The set of exemptions and credits
• C. The government's plan for spending tax revenue
• D. All the economic activity in a society, taxed by government to pay for services

Answer: (D)

Tax base is the total amount of economic activity that can be taxed by the government. It defines the scope of what the tax system applies to—income, consumption, property, and other taxable activities—so that tax rates act on that portion of the economy. The broader the base, the more revenue can be raised without increasing rates; exemptions or credits reduce the base. The statement matches this idea by describing the base as all the economic activity that is taxed to pay for services. The untaxed portion, exemptions/credits, and the government’s spending plan relate to other ideas (relief measures and fiscal policy) rather than what the base itself is.

Tax base is the total amount of economic activity that can be taxed by the government. It defines the scope of what the tax system applies to—income, consumption, property, and other taxable activities—so that tax rates act on that portion of the economy. The broader the base, the more revenue can be raised without increasing rates; exemptions or credits reduce the base. The statement matches this idea by describing the base as all the economic activity that is taxed to pay for services. The untaxed portion, exemptions/credits, and the government’s spending plan relate to other ideas (relief measures and fiscal policy) rather than what the base itself is.