What are some examples of progressive tax?

Answer 1

A progressive tax is any tax RATE that increases as a person's income increases. This means that the percentage of income that the tax payer pays increases as their income increases. For instance, capital gains taxes are the same percentage (around 30%) if the investor makes $10k a year or $500 billion. This is NOT a progressive tax. The United States Income Tax structure is, with the lowest tax "bracket" actually having a negative tax rate due to all of the benefits they get from the government and the people in the highest "bracket" (above $357,700 a year) paying the greatest amount of their income to the government (35%) in income taxes. So the more a person makes, the greater percentage of their income they pay in taxes. Other examples are gift taxes (taxes on gifts to another person that are over a certain amount), some estate taxes, some property taxes (by having higher taxes on homes worth more and raising the tax rates of "rich" neighborhoods), and some complicated annuity taxes.

The opposite of this is called a "regressive tax" that taxes poorer people more. The only real example of this is the sales tax (which is being abolished by some states such as Florida). The sales tax taxes every good at x%, x being whatever the state government decides it to be. One might think "oh well you can only spend what you make, so wouldn't it always be 6% regardless of income?". In theory, this is correct, but in practice it is not. The easiest way to explain it is by looking at basic necessities such as clothes, dishes, etc (food is generally not subject to a sales tax for the following reason). Everyone needs clothes to survive. So both the poor and the rich have to buy clothes. Consider a poor person and a rich person both buy a $20 t-shirt. At 6% (a standard sales tax), the tax on the shirt is 1.20. The issue here is that the $1.20 is a larger percentage of the poor person's income than it is the rich person's income. Eg: Suggest, for simplicity, that the poor person makes $100 a year and the rich person makes $100,000 a year. The sales tax on the shirt is 1.2% of the poor person's income but only .0012% of the rich person's income. Thus, the poor person pays a higher percentage of their income with a sales tax.

A tax system that takes a larger proportion of income from high income people than from low income people.