progressive tax(redirected from Ability-to-pay taxation)
Also found in: Dictionary, Thesaurus, Legal.
Progressive Tax System
A theory behind progressive taxation states that persons or corporations who earn the same or a similar amount of money should be taxed in the same or a similar way. For example, the theory states that two individuals making $50,000 per year should be taxed the same amount, regardless of how they earned their income. This is known as horizontal equity. While most countries have some form of progressive taxation, it is usually coupled with other taxes, such as a sales tax, and few countries treat all income as exactly the same. See also: Regressive tax system.
In a progressive, or graduated, income tax system, taxpayers with higher incomes are taxed at higher rates that those with lower incomes.
Those in favor of this approach say that the greatest tax burden falls on those who can afford to carry it. Opponents argue that it imposes an unfair burden on the people whose ingenuity and hard work make the economy strong.
A tax that imposes a greater burden on the wealthy than on those with low incomes because the tax rate percentage increases as one's income or assets increase.Income taxes and estate taxes are progressive taxes.Contrast with a regressive tax,such as sales tax,that charges the same percentage to all taxpayers but results in a heavier burden to low-income citizens.