A report on Progressive tax

Average tax rates by income groups in France, the United Kingdom, and the United States, 1970 (left) and 2005 (right). Taxes were more progressive in 1970 than in 2005.
A caricature of William Pitt the Younger collecting the newly introduced income tax.
German marginal and average income tax rates display a progressive structure.
"Tax The Rich" banner at an International Union of Socialist Youth campaign for a financial transaction tax.
The function which defines the progressive approach to an income tax, may be mathematically defined as a piecewise function. In every piece (tax bracket), it must be computed cumulatively, considering the taxes which had already been computed to the previous tax brackets. Pictured is the effective income tax for Portugal in 2012 and 2013.
Distribution of US federal taxes from 1979 to 2013, based on CBO Estimates.

Tax in which the tax rate increases as the taxable amount increases.

- Progressive tax
Average tax rates by income groups in France, the United Kingdom, and the United States, 1970 (left) and 2005 (right). Taxes were more progressive in 1970 than in 2005.

24 related topics with Alpha

Overall

Top marginal tax rate of the income tax (i.e. the maximum rate of taxation applied to the highest part of income)

Income tax

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Tax imposed on individuals or entities in respect of the income or profits earned by them (commonly called taxable income).

Tax imposed on individuals or entities in respect of the income or profits earned by them (commonly called taxable income).

Top marginal tax rate of the income tax (i.e. the maximum rate of taxation applied to the highest part of income)
William Pitt the Younger introduced a progressive income tax in 1798.
Punch cartoon (1907); illustrates the unpopularity amongst Punch readers of a proposed 1907 income tax by the Labour Party in the United Kingdom.
General government revenue, in % of GDP, from personal income taxes. For this data, the variance of GDP per capita with purchasing power parity (PPP) is explained in 27 % by tax revenue
Systems of taxation on personal income
Payroll and income tax by OECD Country

The tax rate may increase as taxable income increases (referred to as graduated or progressive tax rates).

Total revenue from direct and indirect taxes given as share of GDP in 2017

Tax

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Compulsory financial charge or some other type of levy imposed on a taxpayer by a governmental organization in order to fund government spending and various public expenditures (regional, local, or national), and tax compliance refers to policy actions and individual behaviour aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax reliefs.

Compulsory financial charge or some other type of levy imposed on a taxpayer by a governmental organization in order to fund government spending and various public expenditures (regional, local, or national), and tax compliance refers to policy actions and individual behaviour aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax reliefs.

Total revenue from direct and indirect taxes given as share of GDP in 2017
Pieter Brueghel the Younger, The tax collector's office, 1640
Substitution effect and income effect with a taxation on y good.
Budget's constraint shift after an introduction of a lump sum tax or a general tax on consumption or a proportional income tax.
The Laffer curve. In this case, the critical point is at a tax rate of 70%. Revenue increases until this peak, then it starts decreasing.
General government revenue, in % of GDP, from social contributions. For this data, the variance of GDP per capita with purchasing power parity (PPP) is explained in 20% by social contributions revenue.
Egyptian peasants seized for non-payment of taxes. (Pyramid Age)
Public finance revenue from taxes in % of GDP. For this data, the variance of GDP per capita with purchasing power parity (PPP) is explained in 32% by tax revenue.
Diagram illustrating deadweight costs of taxes

Some levy a flat percentage rate of taxation on personal annual income, but most scale taxes are progressive based on brackets of annual income amounts.

Countries' income inequality according to their most recent reported Gini index values as of 2018.

Economic inequality

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There are wide varieties of economic inequality, most notably income inequality measured using the distribution of income (the amount of money people are paid) and wealth inequality measured using the distribution of wealth (the amount of wealth people own).

There are wide varieties of economic inequality, most notably income inequality measured using the distribution of income (the amount of money people are paid) and wealth inequality measured using the distribution of wealth (the amount of wealth people own).

Countries' income inequality according to their most recent reported Gini index values as of 2018.
Global share of wealth by wealth group, Credit Suisse, 2021
Share of income of the top 1% for selected developed countries, 1975 to 2015
Countries by total wealth (trillions USD), Credit Suisse
World map of countries by the inequality-adjusted Human Development Index.
Wealth inequality in the United States increased from 1989 to 2013.
Illustration from a 1916 advertisement for a vocational school in the back of a US magazine. Education has been seen as a key to higher income, and this advertisement appealed to Americans' belief in the possibility of self-betterment, as well as threatening the consequences of downward mobility in the great income inequality existing during the Industrial Revolution.
"Elephant curve": Change in real income between 1988 and 2008 at various income percentiles of global income distribution.
The gender gap in median earnings of full-time employees according to the OECD 2015
A Kuznets curve
As of 2021, Jeff Bezos is the richest person in the world.
As of 2022, Elon Musk is the richest person in the world.

A progressive tax is a tax by which the tax rate increases as the taxable base amount increases.

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Tax rate

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Ratio at which a business or person is taxed.

Ratio at which a business or person is taxed.

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In case of tax brackets, commonly used for progressive taxes, the average tax rate increases as taxable income increases through tax brackets, asymptoting to the top tax rate.

Flat tax

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Tax with a single rate on the taxable amount, after accounting for any deductions or exemptions from the tax base.

Tax with a single rate on the taxable amount, after accounting for any deductions or exemptions from the tax base.

Implementations are often progressive due to exemptions, or regressive in case of a maximum taxable amount.

World distribution of wealth, GDP, and population by region in the year 2000. Created with openoffice.org Calc. Data obtained from the UNU-WIDER report on worldwide distribution of household wealth: Press release. The World Distribution of Household Wealth. December 5, 2006. By James B. Davies, Susanna Sandstrom, Anthony Shorrocks, and Edward N. Wolff. Tables to the 2006 report in Excel (including Gini coefficients for 229 countries). UNU-WIDER.

Distribution of wealth

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Comparison of the wealth of various members or groups in a society.

Comparison of the wealth of various members or groups in a society.

World distribution of wealth, GDP, and population by region in the year 2000. Created with openoffice.org Calc. Data obtained from the UNU-WIDER report on worldwide distribution of household wealth: Press release. The World Distribution of Household Wealth. December 5, 2006. By James B. Davies, Susanna Sandstrom, Anthony Shorrocks, and Edward N. Wolff. Tables to the 2006 report in Excel (including Gini coefficients for 229 countries). UNU-WIDER.
Share of wealth globally by year, as seen by Oxfam, based on the net worth
Pyramid of global wealth distribution in 2013
Countries by total wealth (trillions USD), Credit Suisse
Worlds regions by total wealth (in trillions USD), 2018
Wealth inequality in the United States increased from 1989 to 2013.
Global share of wealth by wealth group
world distribution of wealth by country (PPP)
world distribution of wealth by region (PPP)
world distribution of wealth by country (exchange rates)
world distribution of wealth by region (exchange rates)

Counterbalances to wealth concentration include certain forms of taxation, in particular wealth tax, inheritance tax and progressive taxation of income.

Number of high-net-worth individuals in the world in 2011

Redistribution of income and wealth

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Transfer of income and wealth from some individuals to others through a social mechanism such as taxation, welfare, public services, land reform, monetary policies, confiscation, divorce or tort law.

Transfer of income and wealth from some individuals to others through a social mechanism such as taxation, welfare, public services, land reform, monetary policies, confiscation, divorce or tort law.

Number of high-net-worth individuals in the world in 2011

In a progressive income tax system, a high income earner will pay a higher tax rate (a larger percentage of their income) than a low income earner; and therefore, will pay more total dollars per person.

Figure 1 – tax incidence in perfect competition

Tax incidence

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Effect of a particular tax on the distribution of economic welfare.

Effect of a particular tax on the distribution of economic welfare.

Figure 1 – tax incidence in perfect competition
Inelastic supply, elastic demand: the burden is on producers
Similar elasticities: burden shared

That allows one to derive some inferences about the progressive nature of the tax system, according to principles of vertical equity.

Regressive tax

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Tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases.

Tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases.

The opposite of a regressive tax is a progressive tax, in which the average tax rate increases as the amount subject to taxation rises.

Revenue Act of 1861

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The Revenue Act of 1861, formally cited as ''[http://memory.loc.gov/cgi-bin/ampage?collId=llsl&fileName=012/llsl012.db&recNum=323 Act of August 5, 1861, Chap.

The Revenue Act of 1861, formally cited as ''[http://memory.loc.gov/cgi-bin/ampage?collId=llsl&fileName=012/llsl012.db&recNum=323 Act of August 5, 1861, Chap.

(See Sec.89, which replaced the flat rate with a progressive scale of 3% on annual incomes beyond $600 and 5% on incomes above $10,000 or those living outside the U.S., and perhaps more significantly it was explicitly temporary, specifying termination of income tax in "the year eighteen hundred and sixty-six").