progressive taxation


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Related to progressive taxation: liberalism, Progressive tax system

Progressive taxation

Characterizes a convex tax schedule that results in a higher effective tax rate on higher income levels. Increases for some increases in income, but never decreases with an increase in income.

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 taxation

a structure of TAXATION in which tax is levied at an increasing rate as TAXATION rises. This form of taxation takes a greater proportion of tax from the high-income taxpayer than from the low-income taxpayer. The marginal incidence of taxation rises to some predetermined upper limit, currently 40% in the UK on earned income. For example, a man earning £20,000 with current tax bands as shown in column 1 and the rate of taxation in column 2 would have the tax payable shown in column 3:
column 1 column 2 column 3
tax tax tax
bands rates payable
(£) (%) (£)
0- 5,000 exempt nil
5,001–10,000 20 1,000
10,001–15,000 30 1,500
15,001–20,000 40 2,000
-----
total
4,500
-----

The increasing rate of taxation is shown in column 2. The greater the individual's earnings, the greater the rate of tax that is levied.

Virtually all western economies exhibit some form of progressive taxation structure as a means of redistributing income from the more affluent members of society to the poorer (see POVERTY). This type of ABILITY-TO-PAY PRINCIPLE is regarded, as far as earned personal incomes are concerned, as the most equitable form of taxation. Ideally, however, a progressive income tax structure should not only promote social equity by redistributing income, but should also encourage enterprise by avoiding penal rates of taxation at the upper end of the income scale and, together with SOCIAL SECURITY BENEFITS, provide suitable incentives to work at the lower end of the income scale. Compare REGRESSIVE TAXATION, PROPORTIONAL TAXATION. See also INCIDENCE OF TAXATION, REDISTRIBUTION-OF-INCOME PRINCIPLE OF TAXATION, SUPPLY-SIDE ECONOMICS, LAFFER CURVE, MARGINAL RATE OF TAXATION.

References in periodicals archive ?
As such, the flat tax taxation system may cause the reduction of the tax burden on taxpayers, but it is equally true that reducing the tax burden may also take place within the progressive taxation system (Marinescu, 2008).
So, when I talk about progressive taxation, I am not saying that this is all that we need.
The purpose of this article is to trace the history of progressive taxation from Greece to today's contentious battles in Washington, with a main stop at the Enlightenment.
It's clever (that's the economist's highest compliment), but what exactly is the point of constructing a rationale for progressive taxation on this basis?
Hence, answering the question whether the Government plans to introduce progressive taxation if taking out loans abroad becomes expensive, the Minister says that neither the tax increase nor intro-duction of progressive taxation is predicted.
Raising taxes or levying progressive taxation is not being considered because that would make a lot of businesses close down, Finance Minister Zoran Stavreski said Wednesday.
Putin hinted as much with his "United People's Front" and his talk at the recent United Russia conference about progressive taxation and increased social spending, stealing a page from the Communists' manual.
The survey revealed that citizens of countries with most progressive taxation said their life is closer to "the best possible.
We need to have progressive taxation like they do elsewhere.
Each of these systems will be examined as part of the analysis of progressive taxation.
There was no history of progressive taxation, although that development fits the goal of Judaism to create a just society; such taxes were adopted in the modern State of Israel.
Even with unprecedented individual income inequality in the nation today, the principles of progressive taxation can be further gutted without destroying the fabric of our society and culture.

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