What is a progressive tax? - 2022 - Robin Hood (2023)

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A progressive tax system is like an airplane...

The better seat you have on the plane, the higher the cost you will have to pay for your ticket. The worse seat you have, the less you have to pay. The better your income, the more taxes you'll have to pay, not just in total dollars, but as a percentage of your income.

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In a progressive tax system, the percentage someone pays in taxes increases as income increases. Thus, the higher a person's income, the higher the tax rate to be paid; The lower a person's income, the lower the tax rate payable.

The United States has a progressive income tax system with seven different tax brackets, ranging from 10% to 37%. As of 2022, people with incomes of $10,275 or less will only pay 10% tax on their income. Those earning more than $539,900 pay a 37% tax on the portion of their income above that limit.

Here is a breakdown of progressive income taxes in the United States based on a person's 2022 income (for taxes due in the spring of 2023):

• 10% for earnings between $0 and $10,275
• 12% for earnings between $10,276 and $41,775
• 22% for earnings between $41,776 and $89,075
• 24% for income from $89,076 to $170,050
• 32% for earnings between $170,051 and $215,950
• 35% for income from $215,951 to $539,900
• 37% for income of $539,901 or more

United States usemarginal tax rates, which means that each income tax rate only applies to a certain portion of your income. For example, everyone pays a 10% tax rate on the first $10,275 of their income. Those earning between $10,276 and $41,775 pay a marginal tax rate of 12%, but only on income within that range. This system helps ensure that an increase in income does not unfairly affect taxpayers and that no one pays more than their fair share in taxes.

In the United States, your marginal tax rates are based on yours.AGI, not your actual income. Your Adjusted Gross Income allows for certain deductions that can help you reduce your incometaxable income. The United States also has many tax breaks that can help people reduce their taxable income and put them in a lower tax bracket. The 2022 standard deduction, which is available to all taxpayers, reduces a person's taxable income by $12,950. (In 2023, the standard deduction will increase to $13,850.) Other individual deductions are available for certain people, eg. B. Individuals who have paid interest on student loans, donated to charity, or contributed to aIndividual Retirement Account (IRA).

Advocates of a progressive income tax system point out that the higher a person's income, the more he can contribute to the income tax. Someone earning six figures is likely to have more leeway in their budget than someone living on the poverty line and struggling to make ends meet.

Progressive income taxes not only allow low-income people to keep a larger share of their income, but they are also used for many programs that help low-income people financially.

One such program is Medicaid, which provides health insurance for people living in poverty. Many argue that this helps keep everyone's expenses down in the long run by allowing low-income people to access preventive care. Otherwise, they can rack up higher medical bills by waiting until they need an emergency room visit to seek medical help. Another example is the Earned Income Tax Credit, which offers a tax credit to low-income people.

Progressive income tax advocates also argue that saving for low-income people has the greatest economic impact, even more so than saving for high-income people. The reason for this impact is that low-income people spend all of their income every year, which helps to stimulate the economy. On the other hand, people with high incomes save more of their money than they spend it entirely.

There are also many critics of the progressive income tax system. Opponents of the progressive tax system argue that these taxes discriminate against high-income earners, forcing them to pay more than their fair share.

In the United States in particular, high-income people do not benefit from many taxpayer-funded welfare programs, so progressive taxes have been criticized as a form of unfair income redistribution. Critics also argue that a progressive tax system discourages hard work and success because it makes people pay a higher tax rate as their income increases.

The United States and many western countries have progressive income tax systems, where those who earn more money pay a higher percentage of their income in taxes.

TerCanada has a progressive income tax system with five different tax brackets, ranging from 15% to 33%. The lower 15% tax bracket applies to income of $50,197 (CAD) or less. The higher tax bracket of 33% applies to income of $221,708 (CAD) or more. Tax rates in Canada are marginal like in the United States.

MexicoMexico also has a progressive income tax system. Low income, those earning less than 7,735.00 (MXN), only pay 1.92% income tax on their earnings. The state's highest income tax rate is 35%, but that rate only applies to income over $3,898,140.12 (MXN). Tax rates in Mexico are marginal like in the United States.

Great BritainThere are four types of income tax in the UK, ranging from 0% to 45%. People do not have to pay income tax on income of £12,570 or less. The higher rate of 45% applies to income over £150,000. UK tax rates are marginal to US tax rates.

GermanyIndividuals in Germany pay income tax in four progressive income tax brackets from 0% to 45%. Individuals earning €9,984 or less do not pay income tax on their earnings. And anyone earning more than €277,826 pays a 45% tax rate on the highest income. Tax rates in Germany are marginal like in the United States.

Whereas a progressive tax imposes a higher rate on those with higher incomes, a regressive tax makes low-income people pay a higher percentage of their income in taxes. Several taxes in the United States fall into the category of regressive taxes, including sales taxes, taxes on royalties (which we pay for a specific service), property taxes, and taxes on sins (taxes that are levied on items we consider harmful to society, such as alcohol and tobacco).

Regressive taxes are actually the result of flat taxes that affect specific individuals differently. For example, the sales tax in Wisconsin is 5%. Everyone pays the same 5% regardless of income. However, that 5% sales tax eats up a significantly larger percentage of the income of someone earning $25,000 than someone earning $50,000. Let's say the person making $25,000 a year paid $500 in sales tax for a year. They spent 2% of their income on sales tax. If the person earning $50,000 a year were to spend that same $500 on sales tax, that would only represent 1% of their income.

Some states rely more heavily on regressive taxes to fund their government spending. Nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming) have no state income tax. Instead, these states rely on other forms of tax revenue to pay for government services. In many cases, they make up this shortfall through sales and property taxes, which are regressive taxes. As a result, some states have a more regressive tax system than others, meaning low-income people bear a disproportionate tax burden when paying for government spending.

Unlike progressive and regressive taxes, where taxpayers receive a different rate based on their income, flat taxes charge all taxpayers the same rate proportional to their income. If the rate is 10%, you will pay 10% in taxes regardless of whether your income is $10,000 or $100,000. Some also refer to flat taxes as proportional taxes.

The United States does not have a flat rate income tax, but examples of flat rate taxes still exist in the country.The Social Security Tax(the tax you pay on profitsSocial Security AdministrationOffers for seniors and disabled) is flat, for example. All wage earners pay 6.2% of their income in taxes, regardless of how much they earn. Likewise, all self-employed workers pay 15.3%, as they pay both the employer's share and the employee's share.

As a side note, you might also consider the regressive Social Security tax. Beginning in 2022, Social Security tax will only apply to income of $147,000 or less. Therefore, people earning more than this amount end up paying a lower percentage of their total income than those earning less than this amount. But if you only consider those earning less than $147,000, it's a flat tax.

Some countries use a flat tax for their income taxes: Russia is the biggest. Russia charges all taxpayers a flat rate of 13% of their income. Other examples of countries with flat income tax are Estonia, Latvia and Lithuania.

It is impossible to say with certainty which is the best tax system among progressive, regressive and flat taxes. All three models have supporters and critics. In the United States, the government chooses to use all three systems simultaneously, presumably so as not to always disproportionately burden one income group. Various political parties promote the equity of different tax systems, and certainly one can speak for all models.

Although the United States currently has a progressive income tax system, some people have argued that the United States should introduce a flat income tax, claiming that it would level the playing field. The current income tax system in the United States means that the more you earn, the higher the percentage you pay in taxes. Some argue that this discourages income growth and that taxpayers may be more motivated to excel in their careers if they don't worry about paying more taxes.

By the waymarginal tax ratesIf you work in the United States, an income tax rate only applies to income that actually falls within the income bracket of that tax bracket. However, many misconceptions about the tax system have led some to believe that moving to a higher tax bracket means that all of one's income is taxed at a higher rate.

Politicians have proposed several flat tax models in the United States. Most of these proposals eliminate all currently existing deductions and exemptions. They also eliminate income taxes on capital gains, such asdividendsYCapital gain. Some politicians have proposed flat tax schemes that keep the deductions now available.

Opponents of a flat tax model argue that these taxes are bad for low-income people because they need more of their income to earn a living. These opponents equate a flat tax with a regressive tax because low-income people feel the effects more than high-income people.

Ultimately, the government depends on taxpayer money to function. All parts of public spending, from schools to wars, require people to pay taxes. As Supreme Court Justice Oliver Wendell Holmes Jr. in 1927: "Taxes are what we pay in civilized society."

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