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

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 ?
1 Main features of the tax system in Romania, Bulgaria and Croatia Croatia Romania Fiscal system Classic and progressive taxation Classic Corporate tax rate 18% (*) 16% Personal income rate Monthly taxable Rate 16% earned income, HRK within brackets, % Up to 17.
The wealthy typically obtain many forms of "income" from capital which do not necessarily become part of the tax base, and are thus not subjected to progressive taxation at all.
In the given situation, a system of compound progressive taxation having for example 1,500 RON as upper limit of the first income instalment and a tax rate of 14%, the second instalment ranging between 1,501 RON and 3,000 RON and a rate of 16%, and the third instalment being the incomes that exceed 3,001 RON taxed by 30%, would positively affect 83.
But this solution rested on the relative empowerment of labor and the construction of the "social state" (Piketty's term) funded by progressive taxation.
Opponents of progressive taxation often argue that the (apparent) benefits of progressive taxation outweigh the costs as they create disincentives to work more or harder.
The minority government coalition of centre-right GERB and right-wing Reformist Bloc on Wednesday joined forces with opposition liberal Movement for Rights and Freedoms, or DPS, to defeat on first reading two separate draft amendments to income tax law demanding reintroduction of progressive taxation.
James Meade, just like me, believed that progressive taxation and the development of other forms of property relationships and of other forms of governance are complementary institutions.
In Latin America, a shift to a more progressive taxation system in the early 2000s has been a significant factor behind the region's recent decline in inequality.
Taking into account the whole spectrum of tools, such as tax reliefs, a system of progressive taxation that can be used in taxation policy, we can construct taxes so that, if needed, they are low for some taxpayers and high for others.
Plaid Cymru believes that progressive taxation of unhealthy products can be part of the solution to obesity.
Overall, however, the emotional appeal of lower taxes and less spending trumps less viscerally engaging arguments for progressive taxation or fixing the public plumbing, posing a critical challenge for progressives.
His strategies helped to turn Sweden into a world leader in achieving economic security, with a well-developed welfare state, progressive taxation, effective industry policies and one of the most egalitarian income distributions anywhere in the world.

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