IDs and Paired-Concept Questions

Question

Examlex · Accepted Answer

The Answer is Progressive Tax:
A progressive tax is a tax system where the tax rate increases as the taxable income or wealth increases. The principle behind a progressive tax is the ability-to-pay principle, which suggests that individuals who earn more can afford to pay a higher percentage of their income in taxes. This type of tax system is designed to reduce the tax burden on individuals who have less ability to pay, as they will be taxed at a lower rate. The most common example of a progressive tax is the income tax system in many countries, where tax brackets are structured so that individuals with higher incomes fall into higher tax rate brackets.

Regressive Tax:
A regressive tax, on the other hand, is a tax system where the tax rate decreases as the taxable income or wealth increases. This means that lower-income individuals pay a higher proportion of their income in taxes compared to higher-income individuals. Regressive taxes tend to place a heavier burden on lower-income earners, as the tax takes up a larger percentage of their income. Sales taxes and excise taxes on essential goods are often considered regressive because they take up a larger proportion of income from those with lower incomes.

Relationship between Progressive and Regressive Tax:
The relationship between progressive and regressive taxes lies in their impact on different income groups and their approach to tax fairness. Progressive taxes are seen as a way to ensure that those who have a greater capacity to pay contribute more to the funding of public services and infrastructure. This approach is often justified by the argument that higher earners benefit more from the economic system and thus should contribute more to its maintenance.

In contrast, regressive taxes can lead to increased financial pressure on lower-income individuals and families, as they do not take into account the differing abilities to pay. This can exacerbate income inequality, as a larger share of income from the poor goes towards taxes compared to the wealthy.

In a comprehensive tax system, both progressive and regressive tax elements may be present. Policymakers often debate the balance between these types of taxes to achieve both revenue generation and social equity. The interplay between progressive and regressive taxes is a central issue in discussions about tax policy, economic equality, and social welfare.

IDs and Paired-Concept Questions

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