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Progressive Tax |
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According to Progressive Tax the rate of tax increases with an increase in the income. Progressive Tax is one form of taxation in which the proportion paid is related to the income of an individual or an organization and the rate of tax increases when the income increases. The Progressive Tax is just the opposite of regressive tax according to which the rate of tax falls down with increase in income.
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In cases where the effective tax rate increases with an increase of the amount to which it has been levied we can call it Progressive Tax. The Progressive Tax is good for the low-income group people as it is proportional to the income. The people with low income have to pay the tax at a low rate, as the income is low. On the contrary, the high-income people will have to pay more the amount of the income as tax as the tax rate for the high-income people will be higher than the low income people. The concept of Progressive Tax is based on the ability to pay. In a Progressive Tax larger percentage of income is taken away from high-income groups. According to the progressive tax system the tax rate payable by different income groups can be like, 30% for high-income taxpayers, 15% for middle-income taxpayers and 10% for low-income taxpayers. The U.S. federal income tax follows the progressive tax system.
Tax can be described as the financial charge that is imposed on any individual or any other entity. The word “Tax” came from “Taxation” which means an estimate. Tax levied by a state or a functional equivalent of a state. Tax is imposed on income and wealth on the sale or purchase of livestock or merchandise. Tax was collected in the ancient tom also but though it was not organized or systematic. During that period tax collected regularly also. Today tax is collected in an organized manner. Tax is paid to support the Government. It is not a voluntary contribution or donation but an enforced contribution by the individual or legal entity. In the modern days taxes are paid in money. Tax is collected by the government agency and non-payment of taxes the individual or any non-paying entity has to face the penalties. Taxes are levied on income and wealth on purchase or sale of merchandise or livestock. The rate of tax levied on depends on the income or consumption. The Progressive tax, Regressive tax, Proportional tax are the three forms of tax.
In Progressive Tax system those who have more disposable income, pay a higher percentage of that income as tax in comparison to those with less income. The progression of tax rate from low to high is there in the Progressive Tax system. Progressive Tax can also be applied to the adjustment of the tax base. This is done by the use of tax exemptions, selective taxation or tax credits, which would produce progressive distributional effects. The progressive tax is just the contrary to regressive tax. According to regressive tax the tax rate will fall as the amount to which the tax has been levied increases.
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