Progressive Tax System Flashcards, test questions and answers

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What is Progressive Tax System?

A progressive tax system is a taxation system that charges higher rates to individuals and households with higher incomes. This type of tax system, which has been around since the late 19th century, has been implemented by governments around the world in order to reduce economic inequality, raise revenue for public services, and redistribute wealth.The primary way that progressive taxes work is by having different tax brackets based on income levels. As taxpayers’ incomes increase within their individual brackets, they are subject to increasingly higher rates of taxation. For example, if an individual earns $50,000 per year and is in the lowest tax bracket (which might be 10%), they would pay $5,000 in taxes. However, if they were then to earn $100,000 per year and move into a higher bracket (which might be 20%), their taxes would then be $20,000 for that year instead of the initial $5k. In this way those who have higher incomes are taxed at a greater rate than those with lower incomes; this helps reduce economic inequality between citizens within society as those with more money pay more taxes relative to their income than those with less money do relative to theirs. Aside from reducing inequality within society progressive taxes can also raise revenue for governments through increased taxation on wealthier citizens or households. This additional revenue can then be used for government programs such as education or healthcare services; helping ensure access for all citizens regardless of their income level or social class status. Furthermore progressive taxes also help redistribute wealth among societies; by having wealthy individuals pay more in taxes it shifts some of the burden away from lower-income earners while still allowing them access public services provided by governments funded through progressive taxation systems.