Progressive tax

progressiveprogressive taxationprogressive income taxgraduated income taxprogressivityprogressive taxesprogressive income taxesprogressivelygraduated taxprogressive tax system
A progressive tax is a tax in which the average tax rate (taxes paid ÷ personal income) increases as the taxable amount increases.wikipedia
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Tax

taxationtaxeslevy
A progressive tax is a tax in which the average tax rate (taxes paid ÷ personal income) increases as the taxable amount increases.
The incidence of taxation varies by system, and some systems may be viewed as progressive or regressive.

Land value tax

land taxland value taxationland
For example, a wealth or property tax, a sales tax on luxury goods, or the exemption of sales taxes on basic necessities, may be described as having progressive effects as it increases the tax burden of higher income families and reduces it on lower income families.
A land value tax is a progressive tax, in that the tax burden falls on titleholders in proportion to the value of locations, the ownership of which is highly correlated with overall wealth and income.

Tax rate

marginal tax ratetax rateseffective tax rate
A progressive tax is a tax in which the average tax rate (taxes paid ÷ personal income) increases as the taxable amount increases.
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.

Regressive tax

regressiveregressive taxationburdening the poor
The opposite of a progressive tax is a regressive tax, where the average tax rate or burden decreases as an individual's ability to pay 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 In between is a flat or proportional tax, where the tax rate is fixed as the amount subject to taxation increases.

Flat tax

flat income taxflatflat rate
The act was signed into law by President Abraham Lincoln, and replaced the Revenue Act of 1861, which had imposed a flat income tax of 3% on incomes above $800.
A true flat tax would be a proportional tax, but implementations are often progressive and sometimes regressive depending on deductions and exemptions in the tax base.

Sixteenth Amendment to the United States Constitution

Sixteenth Amendment16th AmendmentSixteenth
The Sixteenth Amendment to the United States Constitution, adopted in 1913, permitted Congress to levy all income taxes without any apportionment requirement.
During the late nineteenth century, various groups, including the Populist Party, favored the establishment of a progressive income tax at the federal level.

Kakwani index

Indices such as the Suits index, Gini coefficient, Kakwani index, Theil index, Atkinson index, and Hoover index have been created to measure the progressivity of taxation, using measures derived from income distribution and wealth distribution.
The Kakwani index is a measure of the progressivity of a social intervention, and is used by social scientists, statisticians, and economists.

Income tax

income taxesincometaxes
The term is frequently applied in reference to personal income taxes, in which people with lower income pay a lower percentage of that income in tax than do those with higher income.
Some systems impose higher rates on higher amounts of income.

Revenue Act of 1862

passed excise taxes
In the United States, the first progressive income tax was established by the Revenue Act of 1862.
The act also introduced the United States' first progressive tax with the intent of raising millions of dollars for the Union.

Revenue Act of 1861

August 5, 1861
The act was signed into law by President Abraham Lincoln, and replaced the Revenue Act of 1861, which had imposed a flat income tax of 3% on incomes above $800.
(See Sec.89, which replaced the flat rate with a progressive scale of 3% on annual incomes beyond $600 ($12,742 in 2009 dollars) and 5% on incomes above $10,000 ($212,369 in 2009 dollars) 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").

Suits index

Indices such as the Suits index, Gini coefficient, Kakwani index, Theil index, Atkinson index, and Hoover index have been created to measure the progressivity of taxation, using measures derived from income distribution and wealth distribution.
For a progressive tax (for example, where higher income tax units pay a greater fraction of their income as tax), the Suits index is positive.

Wealth tax

wealthcapital taxwealth taxes
For example, a wealth or property tax, a sales tax on luxury goods, or the exemption of sales taxes on basic necessities, may be described as having progressive effects as it increases the tax burden of higher income families and reduces it on lower income families.
Progressive tax

Thomas Piketty

PikettyPiketty, ThomasThomas Picketty
The economists Thomas Piketty and Emmanuel Saez wrote that decreased progressiveness in US tax policy in the post World War II era has increased income inequality by enabling the wealthy greater access to capital.
To address this problem Piketty proposes redistribution through a progressive global tax on wealth.

Redistribution of income and wealth

redistribution of wealthincome redistributionwealth redistribution
This is especially true if taxation is used to fund progressive government spending such as transfer payments and social safety nets.
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.

Fiscal drag

bracket-creep
This phenomenon is known as bracket creep and can cause fiscal drag.
One cause of fiscal drag may be bracket creep, where progressive taxation increases automatically as taxpayers move into higher tax brackets due to inflation.

International Monetary Fund

IMFInternational Monetary Fund (IMF)the International Monetary Fund
According to IMF, some advanced economies could increase progressivity in taxation for tackling inequality, without hampering growth, as long as progressivity is not excessive.
The Fiscal Affairs department of the IMF, headed at the time by Acting Director Sanjeev Gupta, produced a January 2014 report entitled "Fiscal Policy and Income Inequality" that stated that "Some taxes levied on wealth, especially on immovable property, are also an option for economies seeking more progressive taxation ... Property taxes are equitable and efficient, but underutilized in many economies ... There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument."

Economic inequality

income inequalityinequalitywealth gap
Progressive taxation is often suggested as a way to mitigate the societal ills associated with higher income inequality, as the tax structure reduces inequality, but economists disagree on the tax policy's economic and long-term effects.
Progressive taxation reduces absolute income inequality when the higher rates on higher-income individuals are paid and not evaded, and transfer payments and social safety nets result in progressive government spending.

Tax policy and economic inequality in the United States

US tax policy
The economists Thomas Piketty and Emmanuel Saez wrote that decreased progressiveness in US tax policy in the post World War II era has increased income inequality by enabling the wealthy greater access to capital.
A progressive tax code is believed to mitigate the effects of recessions by taking a smaller percentage of income from lower-income consumers than from other consumers in the economy so they can spend more of their disposable income on consumption and thus restore equilibrium.

Distribution of wealth

wealth distributionwealth inequalitydistribution
Indices such as the Suits index, Gini coefficient, Kakwani index, Theil index, Atkinson index, and Hoover index have been created to measure the progressivity of taxation, using measures derived from income distribution and wealth distribution.
Counterbalances to wealth concentration include certain forms of taxation, in particular wealth tax, inheritance tax and progressive taxation of income.

Tax bracket

tax bracketsbracketsbracket
When taxable income falls within a particular tax bracket, the individual pays the listed percentage of tax on each dollar that falls within that monetary range.
Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, although this is much rarer).

Gini coefficient

Gini indexGiniequality
Indices such as the Suits index, Gini coefficient, Kakwani index, Theil index, Atkinson index, and Hoover index have been created to measure the progressivity of taxation, using measures derived from income distribution and wealth distribution.
Developing countries like Brazil have also improved basic services like health care, education, and sanitation; others like Chile and Mexico have enacted more progressive tax policies.

Taxable income

exemptionincomeIRC §63
For example, a person in the U.S. who earned $10,000 US of taxable income (income after adjustments, deductions, and exemptions) would be liable for 10% of each dollar earned from the 1st dollar to the 7,550th dollar, and then for 15% of each dollar earned from the 7,551st dollar to the 10,000th dollar, for a total of $1,122.50.
Many systems impose tax at different rates for differing types (e.g., capital gains or salaries) or levels of income (e.g., graduated rates).

United States

American🇺🇸U.S.
In the United States, there are seven income tax brackets ranging from 10% to 39.6% above an untaxed level of income based on the personal exemption and usually various other tax exemptions, such as the Earned Income Tax Credit and home mortgage payments.
U.S. taxation has historically been generally progressive, especially the federal income taxes, though by most measures it became noticeably less progressive after 1980.

Property tax in the United States

property taxesproperty taxproperty
The US federal tax system also includes deductions for state and local taxes for lower income households which mitigates what are sometimes regressive taxes, particularly property taxes.
Others, however, have argued that property taxes are broadly progressive, since people of higher incomes are disproportionately likely to own more valuable property.

Linear equation

linearlinear equationsslope-intercept form
There are two common ways of computing a progressive tax, corresponding to point–slope form and slope–intercept form of the equation for the applicable bracket.
This is commonly done with a progressive tax computation, using either point–slope form or slope–intercept form.