Business Definition for: progressive tax
progressive tax
levy that requires a higher percentage payment on higher income. The personal income tax structure in the United States with its multiple brackets has been traditionally an example of a progressive tax.
See also
tax rate schedule
progressive tax
income tax system in which those with higher incomes pay taxes at higher rates than those with lower incomes; also called graduated tax. The U.S. income tax system is based on the concept of progressivity. There are several tax brackets, based on the taxpayer's income, which determine the tax rate that applies to each taxpayer.
See also
regressive tax
,
consumption tax
,
flat tax
progressive tax
tax whose burden falls more heavily on the wealthy or high-income than on the poor or low-income. Contrast with
proportionate taxation
,
regressive taxation
.
Example: The federal
estate tax
is considered a progressive tax because it taxes only highly valued estates. It is paid by estates of those who die with significant
asset
.
progressive tax
tax whose rate increases as the amount subject to tax increases, thereby taxing the wealthy at a higher rate than the poor or middle class.
See also
regressive tax
Related Terms:
schedule used to determine the tax on a given taxable income. The marginal tax rate typically increases as the taxable income rises.
system in which the percentage of income paid declines as income rises. Under a regressive system, as income rises from $15,000 to $100,000, the tax rate would fall from 20% to 10%, for example. In this sense, a regressive tax is the opposite of a progressive tax. The term is also used generally to refer to any tax system that favors the rich at the expense of the poor. The general sales tax with its fixed rate is considered regressive, because lower income groups tend to spend a higher percentage of their incomes on goods and services than higher income groups.
levy charged directly on a specified item or commodity. It may be viewed as an indirect form of taxation in that it is not contingent upon income but on consumption of an item. Examples include excise taxes on cigarettes
nd alcohol, and sales taxes.
one in which the income tax rate is the same for all income levels. It is a proportional tax. A pure flat tax would eliminate all deductions, exemptions, and loopholes, and tax all income at the same low tax rate. The tax would also make the tax system less complex and more equitable.
system in which the percentage of income paid declines as income rises. Under a regressive system, as income rises from $15,000 to $100,000, the tax rate would fall from 20% to 10%, for example. In this sense, a regressive tax is the opposite of a progressive tax. The term is also used generally to refer to any tax system that favors the rich at the expense of the poor. The general sales tax with its fixed rate is considered regressive, because lower income groups tend to spend a higher percentage of their incomes on goods and services than higher income groups.
Referring Terms:
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