What is the defining feature of a progressive tax?
Answer (1)
A progressive tax features an increasing tax rate as the taxable amount increases.
Higher-income earners pay a larger percentage of their income in taxes.
This contrasts with regressive and proportional tax systems.
Progressive taxes help fund social programs and reduce income inequality. The tax rate increases as the taxable amount increases.
Explanation
Definition of Progressive Tax A progressive tax is a tax in which the tax rate increases as the taxable base amount increases. This means that higher-income earners pay a larger percentage of their income in taxes compared to lower-income earners.
Defining Feature The defining feature of a progressive tax is its increasing tax rate as income rises. This contrasts with regressive taxes, where the tax rate decreases as income rises, and proportional taxes, where the tax rate remains constant regardless of income level.
Examples
Progressive taxes are often used to fund social programs and reduce income inequality. For example, consider two individuals: one earning $50,000 per year and another earning $500,000 per year. Under a progressive tax system, the higher-income earner not only pays more in taxes but also pays a higher percentage of their income. This helps redistribute wealth and provides resources for public services like education, healthcare, and infrastructure. This ensures that those who can afford to contribute more do so, supporting a more equitable society.
