Progressive tax

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A progressive tax is a tax in which the tax rate increases as the taxable amount increases.^[1][2][3][4] The term progressive refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate.^[5][6] The term can be applied to individual taxes or to a tax system as a whole. Progressive taxes are imposed in an attempt to reduce the tax incidence of people with a lower ability to pay, as such taxes shift the incidence increasingly to those with a higher ability-to-pay. The opposite of a progressive tax is a regressive tax, such as a sales tax, where the poor pay a larger proportion^[how?] of their income compared to the rich (eg spending on groceries and food staples varies little against income, so poor pay similar to rich even while latter has much higher income).^[4]

The term is frequently applied in reference to personal income taxes, in which people with lower income pay a lower percentage of that income in tax than do those with higher income. It can also apply to adjustments of the tax base by using tax exemptions, tax credits, or selective taxation that creates progressive distribution effects. For example, a wealth or property tax,^[7] a sales tax on luxury goods, or the exemption of sales taxes on basic necessities, may be described as having progressive effects as it increases the tax burden of higher income families and reduces it on lower income families.^[8][9][10]

Progressive taxation is often suggested as a way to mitigate the societal ills associated with higher income inequality,^[11] as the tax structure reduces inequality;^[12] economists disagree on the tax policy's economic and long-term effects.^[13][14][15] One study suggests progressive taxation is positively associated with subjective well-being, while overall tax rates and government spending are not.^[16]