progressive tax

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Related to Graduated tax: progressivity, Graduated income tax

Progressive Tax System

A system of taxation in which persons or corporations are assessed at a greater percentage of their income according to the theoretical ability to pay. That is, taxpayers pay more in taxes if they earn more in income. For example, taxpayers may pay 25% of their income in taxes up to a certain amount, and 35% of everything earned over that amount.

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.

progressive tax

A tax with a rate that increases as the amount to be taxed increases. For example, a taxing authority might levy a tax of 10% on the first $10,000 of income and increase the rate by 5% per each $10,000 increment up to a maximum of 50% on all income over $80,000. A progressive tax often uses high rates on relatively large incomes and tends to encourage tax shelters. The federal income tax, many state income taxes, and the unified gift-estate tax are progressive taxes. Compare regressive tax.

Progressive tax.

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.

progressive tax

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.

References in periodicals archive ?
Scheduling may be necessary for tax jurisdictions with graduated tax rates or for tax jurisdictions with different tax rates or limitations on various types of income or loss, such as different tax rates on capital gains or limitations on capital losses.
Like the transfer tax, the accessions tax would be assessed on cumulative lifetime gifts and bequests using a graduated tax rate structure.
The result is that this income is subject to a graduated tax under Sec.
Also, because the estate and gift tax are subject to graduated tax rates, the taxpayer's marginal tax bracket for the total amount of taxable gifts made in prior years will determine how much can actually be made in taxable gifts in a year in which there is an increase in the applicable exclusion amount without incurring gift tax in such year.
When a person dies, a graduated tax is imposed on his estate, measured by the value of the property in the estate.