Title: Progressive Tax Definition
Headings: Progressive Tax
Progressive Tax
What Is a Progressive Tax?
Key Takeaways
Progressive Tax
Understanding the Progressive Tax
Advantages of a Progressive Tax
Disadvantages of a Progressive Tax
Progressive Tax vs. Regressive Tax
Progressive Tax vs. Flat Tax

Content: A regressive tax imposes the same rate on all taxpayers, regardless of ability to pay. A sales tax is an example. A flat tax is an income tax that is the same percentage of income for all. The U.S. Social Security payroll tax would be a flat tax except that it has an upper cap. 3 ﻿
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Progressive Tax
Understanding the Progressive Tax
The rationale for a progressive tax is that a flat percentage tax would be a disproportionate burden for people with low incomes. The dollar amount owed may be smaller, but the effect on their real spending power is greater. The degree to how progressive a tax structure is depends upon how much of the tax burden is transferred to higher incomes. If one tax code has a low rate of 10% and a high rate of 30%, and another tax code has tax rates ranging from 10% to 80%, the latter is more progressive. Advantages of a Progressive Tax
On the pro side, a progressive tax system reduces the tax burden on the people who can least afford to pay. That leaves more money in the pockets of low-wage earners, who are likely to spend all of that money on essential goods and stimulate the economy in the process.