What Is Progressive Taxation?

Lots of people, especially around election time and the debates about taxation that occur, wonder about the meaning of progressive taxation and how this system operates. Unlike many other taxation systems, progressive taxation systems control how much someone pays in taxes depending on how much that individual makes. The system might seem confusing at first, but in fact progressive taxation is used in many forms in the United States and around the world when people pay taxes to their local, state, and federal governments. There are many elements to progressive taxation, so be sure to do your research to get a full understanding.

Progressive taxation is really a simple concept – those who make more money pay more money in taxes to the government, which can preserve some kind of ratio of income to taxes paid.  In fact, this is how the income tax system works, so understanding what progressive taxation is is important if you live in the US and pay taxes.

The ratio is not exact – those who make more money have a higher burden when it comes to owing taxes to the government.  

When the tax levels rise, they do not always rise equally among different taxpayer brackets.  A taxpayer who makes more money might even take more of the burden than those at a lower level in the totem pole of tax paying.  It all depends on the tax situation that is introduced, how much debt the system of government has, and how much responsibility the government will take for those who need governmental aid. 

Taxes Which Are Not Progressive

Not every US tax is progressive. Consider the taxes that exist in some states on food, clothes, cigarettes, and other goods for purchase.  It doesn’t make any difference how much money you make – you usually pay that 5% to 10% tax rate in the same way (unless you have some form of waiver from your government because of your financial status.)

Stores are obligated to pass on that tax that is collected for the purchase of those items. The levels of tax on items in certain states – such as the tax on alcohol, cigarettes, and prescription drugs – might change over time, but not in a progressive manner.

If you make a lot of money, you’ll pay the same amount of tax on an item as if someone with less money purchased that item. What’s more, it usually doesn’t matter if you buy a $1 item or a $1,000 item – the tax is usually a percentage and it will not change in ratio depending on the total product price. Progressive taxes do not operate in this way.

Taxation in Brief:  Reasons for Taxes

Taxation is the way that people pay for protection from their government.  Every year, people pay taxes in order to give their governments more money to implement programs of help, security, and protection.  It is the way that – for centuries, if not millennia – people have been giving control to the government and allowing them to have sufficient funds to operate.

But remember – taxes might not be fun to pay, but it isn’t always a waste of money. We want our governments to use our tax money efficiently, such that those who need our help get it, and that those who are struggling really do get a helping hand, but so that our money is not thrown around without careful consideration and research. We want the politicians we elect – who are paid with our tax dollars – to use the remaining funds to make a great impact on our countries while preserving our ideas and values.