Progressive Tax

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DEFINITION of 'Progressive Tax'

A tax that takes a larger percentage from the income of high-income earners than it does from low-income individuals. The United States income tax is considered progressive: in 2010, individuals who earned up to $8,375 fell into the 10% tax bracket, while individuals earning $373,650 or more fell into the 35% tax bracket. Basically, taxpayers are broken down into categories based on taxable income; the more one earns, the more taxes they will have to pay once they cross the benchmark cut-off points between the different tax bracket levels.

BREAKING DOWN 'Progressive Tax'

The U.S. progressive income tax is effectively a means of income redistribution. Individuals who earn more pay higher taxes; those taxes are then used to fund social welfare programs that are used primarily by individuals who earn less. Critics of the progressive tax consider it to be discriminatory and believe that a flat tax system, which imposes the same tax on everyone regardless of income, is a fairer method of taxation.

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RELATED FAQS
  1. Are tax brackets adjusted for inflation?

    Each year, the U.S. Internal Revenue Service (IRS) adjusts tax brackets for changes in the cost of living to calculate federal ... Read Full Answer >>
  2. What is the difference between a regressive tax versus a progressive tax?

    A progressive tax is one that increases along with an individual's ability to pay the tax, while a regressive tax doesn't ... Read Full Answer >>
  3. Are progressive taxes ever more unfair that flat taxes?

    Progressive taxes assign a different tax rate to different taxpayers. Affluent taxpayers pay the highest income tax rates ... Read Full Answer >>
  4. Is a progressive tax more fair than a flat tax?

    Progressive taxation versus flat taxation inspires ongoing debate, and both have proponents and critics. In the United States, ... Read Full Answer >>
  5. Who first came up with the idea of a progressive tax?

    Theodore Roosevelt was the first U.S. president to call for a progressive income tax, which he encouraged Congress to pass ... Read Full Answer >>
  6. Is progressive tax the same thing as marginal tax rate?

    A marginal tax rate is a form of a progressive tax. Any progressive tax is a tax created based on the amount of income an ... Read Full Answer >>
  7. What are the pros and cons of a progressive tax policy and who benefits the most ...

    Those who oppose a progressive tax hierarchy are likely to be those who pay more taxes when such a policy is in place. A ... Read Full Answer >>
  8. What are the differences between regressive, proportional and progressive taxes?

    Tax systems fall into three main categories within the tax code: regressive, proportional and progressive taxes. Regressive ... Read Full Answer >>
  9. Is the marginal tax rate a progressive tax?

    The marginal tax rate is a type of progressive tax system that imposes a higher income tax rate on people with higher incomes, ... Read Full Answer >>
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