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 ?
A study conducted by the PEW Charitable Trusts using the relationship between parent's and children's incomes as an indicator for relative mobility showed that Denmark had three times more relative mobility than the United States, (11) because of (and not despite) Denmark's progressive tax system. (12) This suggests that extremely progressive tax systems are more conducive to upward mobility than mildly progressive or regressive ones.
Government intentions to increase direct tax and decreasing indirect tax are expected to promote progressive tax system in the country.
Galal said that the current economic situation in Egypt, involving slow growth and contraction, is not conducive to the imposition of new taxes, but this does not prevent the government from working on suggestions for reforms to the progressive tax system, which could be implemented in the future.
A progressive tax system is now in effect, ranging from 15% of earnings for those making 10,000 pesos ($400) annually, to 50% for those making more than 50,000 pesos ($2,000).
Both the IRS and California assess tax based on tax brackets, which are the divisions at which tax rates change in a progressive tax system. Progressive tax systems attempt to reduce the "tax incidence" of people with a lower "ability-to-pay," as they shift the incidence increasingly to those with a higher ability-to-pay.
Austerity measures will only depress demand in a classic Keynesian style; instead a mixed policy will combine monetary easing to encourage investment, and a progressive tax system on wealth will help reduce the fiscal deficit.
ySTANBUL (CyHAN)- A newly proposed tax bill set for debate in Parliament aims to create a more progressive tax system and close tax loopholes, Turkey's Finance Minister Mehmet E[currency]imE-ek said over the weekend.
According to the report, Hubbard opposed raising tax rates for the rich, but added, "We need a progressive tax system."
Ramseyer argues no because unequal taxation, which would be used at least partly to fund nuclear power, leads to most voters receiving the benefits while a small minority of taxpayers pay the bills through the progressive tax system.
In this view, inequality is a social injustice that can be remedied or mitigated by a progressive tax system. It is often proffered as an argument for basic "fairness," but since proponents haven't united around a specific principle of fairness in its support, we will consider it separately.
"If we are to get a more progressive tax system I would like to see it smoothed out."
Simplifying, while one group believes this is a good choice, as it shares prosperity and reduces social inequality, another believes a progressive tax system would result in people and firms paying more taxes.

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