autonomous tax vs flat income tax vs progressive income tax

The opposite of a progressive tax is a regressive tax, where the tax rate decreases as the amount subject to taxation increases. For example, a sales tax on luxury goods or the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption or decreases a tax burden on low end consumption respectively.

It can also apply to adjustment of the tax base by using tax exemptions, tax credits, or selective taxation that would create progressive distributional effects. The term is frequently applied in reference to personal income taxes, where people with more disposable income pay a higher percentage of that income in tax than do those with less income. Progressive taxes attempt to reduce the tax incidence of people with a lower ability-to-pay, as they shift the incidence disproportionately to those with a higher ability-to-pay. It can be applied to individual taxes or to a tax system as a whole a year, multi-year, or lifetime. “Progressive” describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate. over 70%), as in the UK in the late 1970s.

Sometimes the top band of income has been subject to a very high tax rate (e.g. For example, the first $5000 of income might be tax-free, the next $20 000 of income might be taxed at 20%, income between $25 000 and $50 000 at 30% and any income above $50 000 at 40%. This is a straightforward question of fiscal policy – should people who earn more pay direct tax (tax on income) at a higher rate or not? Where progressive tax rates operate, different rates usually apply for different bands of income.

Autonomous tax vs flat income tax vs progressive income tax