Progressive tax system

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Progressive tax system

A tax system that taxes the wealthy at a higher percentage rate than the less wealthy.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
"Governments could introduce higher minimum social standards by revolutionizing the progressive tax systems, distributing subsidies or vouchers or offering rewards/prizes," the authors wrote. 
He points out that highly progressive tax systems may be complicated to administer and provide significant scope for tax avoidance, but governments with expertise in auditing companies should have no trouble.
This, together with the VAT and excises will help ensure efficient and progressive tax systems in the region and generate the bulk of non-oil tax revenues for most countries' budgets," said the report titled 'Diversifying government revenues inthe GCC: Next steps'.
First, reforms must establish or improve progressive tax systems (where those who earn higher incomes pay more tax than those on lower incomes) and which must also have the capacity to ensure fair and equitable income redistribution.
The seriousness of the region's political leaders should be gauged according to two criteria: their readiness to push for robust and progressive tax systems and their sincerity about introducing checks and balances and promoting judicial independence.
Less progressive tax systems thus allow those at the top to take advantage of the rest, and since tax collection is not a transparent process, those who are on the losing end often fail to realize that they are being harmed.
From the south to the north, PSI affiliate unions are working together across borders to end tax havens, tax avoidance and corruption, and to bring in progressive tax systems that are properly resourced and enforced.
Ireland has one of the most progressive tax systems in the OECD now.
The study notes that on average the total tax burden in countries that impose a flat rate income tax paradoxically remains higher (46.82%) than in progressive tax systems (44.56%).
The most developed countries in the world, like the United States, Germany, Finland, Japan, all have progressive tax systems. These countries have understood that, although the free market is a precondition for achieving economic development, market forces cannot guarantee a distribution of income sufficient to all individuals and families to meet basic needs.
In their view, besides simplicity, any tax system must balance the competing interests of progress and justice, which the authors term "the economic cost of progressive tax systems." To measure these costs properly, they argue that it is "critically important" for policymakers to know how taxes affect the economy and, more important, how to "evaluate claims about those effects."
The report urges G-20 countries to adopt three guarantees for children - progressive tax systems that benefit children, especially the poorest and excluded; end discrimination and barriers to social and economic participation; and accountability by measurement of multidimensional and monetary poverty.

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