Progressive tax

A progressive tax is a tax in which the average tax rate (taxes paid ÷ personal income) increases as the taxable amount increases.[1][2][3][4][5] The term "progressive" refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate.[6][7] The term can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes are imposed in an attempt to reduce the tax incidence of people with a lower ability to pay, as such taxes shift the incidence increasingly to those with a higher ability-to-pay. The opposite of a progressive tax is a regressive tax, where the average tax rate or burden decreases as an individual's ability to pay increases.[5]

The term is frequently applied in reference to personal income taxes, in which people with lower income pay a lower percentage of that income in tax than do those with higher income. It can also apply to adjustments of the tax base by using tax exemptions, tax credits, or selective taxation that creates progressive distribution effects. For example, a wealth or property tax,[8] a sales tax on luxury goods, or the exemption of sales taxes on basic necessities, may be described as having progressive effects as it increases the tax burden of higher income families and reduces it on lower income families.[9][10][11]

Progressive taxation is often suggested as a way to mitigate the societal ills associated with higher income inequality,[12] as the tax structure reduces inequality,[13] but economists disagree on the tax policy's economic and long-term effects.[14][15][16] One study suggests progressive taxation can be positively associated with happiness, the subjective well-being of nations and citizen satisfaction with public goods, such as education and transportation.[17]

Early examples

In the early days of the Roman Republic, public taxes consisted of assessments on owned wealth and property. The tax rate under normal circumstances was 1% of property value, and could sometimes climb as high as 3% in situations such as war. These taxes were levied against land, homes and other real estate, slaves, animals, personal items and monetary wealth. By 167 BC, Rome no longer needed to levy a tax against its citizens in the Italian peninsula, due to the riches acquired from conquered provinces. After considerable Roman expansion in the 1st century, Augustus Caesar introduced a wealth tax of about 1% and a flat poll tax on each adult, this made the tax system less progressive (as it no longer only taxed wealth).[18]

Modern era

Pitt's income tax
A caricature of William Pitt the Younger collecting the newly introduced income tax.

The first modern income tax was introduced in Britain by Prime Minister William Pitt the Younger in his budget of December 1798, to pay for weapons and equipment for the French Revolutionary War. Pitt's new graduated (progressive) income tax began at a levy of 2 old pence in the pound (1/120) on incomes over £60 and increased up to a maximum of 2 shillings (10%) on incomes of over £200. Pitt hoped that the new income tax would raise £10 million, but actual receipts for 1799 totalled just over £6 million.[19]

Pitt's progressive income tax was levied from 1799 to 1802, when it was abolished by Henry Addington during the Peace of Amiens. Addington had taken over as prime minister in 1801, after Pitt's resignation over Catholic Emancipation. The income tax was reintroduced by Addington in 1803 when hostilities recommenced, but it was again abolished in 1816, one year after the Battle of Waterloo.

The United Kingdom income tax was reintroduced by Sir Robert Peel in the Income Tax Act 1842. Peel, as a Conservative, had opposed income tax in the 1841 general election, but a growing budget deficit required a new source of funds. The new income tax, based on Addington's model, was imposed on incomes above £150. Although this measure was initially intended to be temporary, it soon became a fixture of the British taxation system. A committee was formed in 1851 under Joseph Hume to investigate the matter, but failed to reach a clear recommendation. Despite the vociferous objection, William Gladstone, Chancellor of the Exchequer from 1852, kept the progressive income tax, and extended it to cover the costs of the Crimean War. By the 1860s, the progressive tax had become a grudgingly accepted element of the English fiscal system.[20]

In the United States, the first progressive income tax was established by the Revenue Act of 1862. The act was signed into law by President Abraham Lincoln, and replaced the Revenue Act of 1861, which had imposed a flat income tax of 3% on incomes above $800. The Sixteenth Amendment to the United States Constitution, adopted in 1913, permitted Congress to levy all income taxes without any apportionment requirement. By the mid-20th century, most countries had implemented some form of progressive income tax.[21]

Measuring progressivity

Indices such as the Suits index,[8] Gini coefficient, Kakwani index, Theil index, Atkinson index, and Hoover index have been created to measure the progressivity of taxation, using measures derived from income distribution and wealth distribution.[22]

Marginal and effective tax rates

Income Tax Germany 2010
German marginal and average income tax rates display a progressive structure.

The rate of tax can be expressed in two different ways; the marginal rate expressed as the rate on each additional unit of income or expenditure (or last dollar spent) and the effective (average) rate expressed as the total tax paid divided by total income or expenditure. In most progressive tax systems, both rates will rise as the amount subject to taxation rises, though there may be ranges where the marginal rate will be constant. Usually, the average tax rate of a tax payer will be lower than the marginal tax rate. In a system with refundable tax credits, or income-tested welfare benefits, it is possible for marginal rates to fall as income rises, at lower levels of income.

Inflation and tax brackets

Tax laws might not be accurately indexed to inflation. For example, some tax laws may ignore inflation completely. In a progressive tax system, failure to index the brackets to inflation will eventually result in effective tax increases (if inflation is sustained), as inflation in wages will increase individual income and move individuals into higher tax brackets with higher percentage rates. This phenomenon is known as bracket creep and can cause fiscal drag.

Economic effects

There is debate between politicians and economists over the role of tax policy in mitigating or exacerbating wealth inequality and the effects on economic growth.

Income equality

Progressive taxation has a direct effect on reducing income inequality.[13] This is especially true if taxation is used to fund progressive government spending such as transfer payments and social safety nets.[12] However, the effect may be muted if the higher rates cause increased tax evasion.[13][23] When income inequality is low, aggregate demand will be relatively high, because more people who want ordinary consumer goods and services will be able to afford them, while the labor force will not be as relatively monopolized by the wealthy.[24][25] High levels of income inequality can have negative effects on long-term economic growth, employment, and class conflict.[26][27] Progressive taxation is often suggested as a way to mitigate the societal ills associated with higher income inequality.[12] The difference between the Gini index for an income distribution before taxation and the Gini index after taxation is an indicator for the effects of such taxation.[28]

The economists Thomas Piketty and Emmanuel Saez wrote that decreased progressiveness in US tax policy in the post World War II era has increased income inequality by enabling the wealthy greater access to capital.[14]

According to economist Robert H. Frank, tax cuts for the wealthy are largely spent on positional goods such as larger houses and more expensive cars. Frank argues that these funds could instead pay for things like improving public education and conducting medical research,[29] and suggests progressive taxation as an instrument for attacking positional externalities.[30]

Economic growth

A report published by the OECD in 2008 presented empirical research showing a weak negative relationship between the progressivity of personal income taxes and economic growth.[15] Describing the research, William McBride, a staff writer with the conservative Tax Foundation, stated that progressivity of income taxes can undermine investment, risk-taking, entrepreneurship, and productivity because high-income earners tend to do much of the saving, investing, risk-taking, and high-productivity labor.[31][32] According to IMF, some advanced economies could increase progressivity in taxation for tackling inequality, without hampering growth, as long as progressivity is not excessive. Fund also states that the average top income tax rate for OECD member countries fell from 62 percent in 1981 to 35 percent in 2015, and that in addition, tax systems are less progressive than indicated by the statutory rates, because wealthy individuals have more access to tax relief.[33]

Educational attainment

Economist Gary Becker has described educational attainment as the root of economic mobility.[34] Progressive tax rates, while raising taxes on high income, have the goal and corresponding effect of reducing the burden on low income, improving income equality. Educational attainment is often conditional on cost and family income, which for the poor, reduces their opportunity for educational attainment.[35][36] Increases in income for the poor and economic equality reduces the inequality of educational attainment.[37][38] Tax policy can also include progressive features that provide tax incentives for education, such as tax credits and tax exemptions for scholarships and grants.[39][40]

A potentially adverse effect of progressive tax schedules is that they may reduce the incentives for educational attainment.[16][36][41] By reducing the after-tax income of highly educated workers, progressive taxes can reduce the incentives for citizens to attain education, thereby lowering the overall level of human capital in an economy.[16][36][41] However, this effect can be mitigated by an education subsidy funded by the progressive tax.[42] Theoretically, public support for government spending on higher education increases when taxation is progressive, especially when income distribution is unequal.[43]

Psychological factors

IUSY2011 Banner Tax the Rich
"Tax The Rich" banner at an International Union of Socialist Youth campaign for a financial transaction tax.

A 2011 study psychologists Shigehiro Oishi, Ulrich Schimmack, and Ed Diener, using data from 54 countries, found that progressive taxation was positively associated with the subjective well-being, while overall tax rates and government spending were not. The authors added, "We found that the association between more-progressive taxation and higher levels of subjective well-being was mediated by citizens’ satisfaction with public goods, such as education and public transportation."[17] Tax law professor Thomas D. Griffith, summarizing research on human happiness, has argued that because inequality in a society significantly reduces happiness, a progressive tax structure which redistributes income would increase welfare and happiness in a society.[44] Since progressive taxation reduces the income of high earners and is often used as a method to fund government social programs for low income earners, calls for increasing tax progressivity have sometimes been labeled as envy or class warfare,[30][45][46] while others may describe such actions as fair or a form of social justice.[46][47]

Computation

Taxa Real de IRS 2012-2013
The function which defines the progressive approach to an income tax, may be mathematically defined as a piecewise function. In every piece (tax bracket), it must be computed cumulatively, considering the taxes which had already been computed to the previous tax brackets. Pictured is the effective income tax for Portugal in 2012 and 2013.

There are two common ways of computing a progressive tax, corresponding to point–slope form and slope–intercept form of the equation for the applicable bracket. These compute the tax either as the tax on the bottom amount of the bracket plus the tax on the marginal amount within the bracket; or the tax on the entire amount (at the marginal rate), minus the amount that this overstates tax on the bottom end of the bracket.

For example, suppose there are tax brackets of 10%, 20%, and 30%, where the 10% rate applies to income from $1 to $10,000; the 20% rate applies to income from $10,001 to $20,000; and the 30% rate applies to all income above $20,000. In that case the tax on $20,000 of income (computed by adding up tax in each bracket) is 10% × $10,000 + 20% × $10,000 = $1,000 + $2,000 = $3,000. The tax on $25,000 of income could then be computed two ways. Using point–slope form (tax on bottom amount plus tax on marginal amount) yields:

Geometrically, the line for tax on the top bracket passes through the point ($20,000, $3,000) and has a slope of 0.3 (30%).

Alternatively, 30% tax on $20,000 yields 30% × $20,000 = $6,000, which overstates tax on the bottom end of the top bracket by $6,000 − $3,000 = $3,000, so using slope–intercept form yields:

Geometrically, the line for tax on the top bracket intercepts the y-axis at −$3,000 – it passes through the point (0, −$3,000) – and has a slope of 0.3 (30%).

In the United States, the first form was used through 2003, for example (for the 2003 15% Single bracket):[48]

  • If the amount on Form 1040, line 40 [Taxable Income], is: Over— 7,000
  • But not over— 28,400
  • Enter on Form 1040, line 41 [Tax] $700.00 + 15%
  • of the amount over— 7,000

From 2004, this changed to the second form, for example (for the 2004 28% Single bracket):[49]

  • Taxable income. If line 42 is— At least $100,000 but not over $146,750
  • (a) Enter the amount from line 42
  • (b) Multiplication amount × 28% (.28)
  • (c) Multiply (a) by (b)
  • (d) Subtraction amount $5,373.00
  • Tax. Subtract (d) from (c). Enter the result here and on Form 1040, line 43

Examples

Average US Federal Tax Rates 1979 to 2013
Distribution of US federal taxes from 1979 to 2013, based on CBO Estimates.[50]

Most systems around the world contain progressive aspects. When taxable income falls within a particular tax bracket, the individual pays the listed percentage of tax on each dollar that falls within that monetary range. For example, a person in the U.S. who earned $10,000 US of taxable income (income after adjustments, deductions, and exemptions) would be liable for 10% of each dollar earned from the 1st dollar to the 7,550th dollar, and then for 15% of each dollar earned from the 7,551st dollar to the 10,000th dollar, for a total of $1,122.50.

In the United States, there are seven income tax brackets ranging from 10% to 39.6% above an untaxed level of income based on the personal exemption and usually various other tax exemptions, such as the Earned Income Tax Credit and home mortgage payments. The US federal tax system also includes deductions for state and local taxes for lower income households which mitigates what are sometimes regressive taxes, particularly property taxes. Higher income households are subject to the alternative minimum tax that limits deductions and sets a flat tax rate of 26% to 28% with the higher rate commencing at $175,000 in income. There are also deduction phaseouts starting at $112,500 for single filers. The net effect is increased progressivity that completely limits deductions for state and local taxes and certain other credits for individuals earning more than $306,300.[51]

New Zealand has the following income tax brackets (for the 2012–2013 financial year): 10.5% up to NZ$14,000; 17.5% from $14,001 to $48,000; 30% from $48,001 to $70,000; 33% over $70,001; and 45% when the employee does not complete a declaration form.[52] All values are in New Zealand dollars and exclude the earner levy.

Australia has the following progressive income tax rates (for the 2012–2013 financial year): 0% effective up to A$18,200; 19% from $18,201 to $37,000; 32.5% from $37,001 to $80,000; 37% from $80,001 to $180,000; and 45% for any amount over $180,000.[53]

See also

Contrasting models:

References

  1. ^ Webster (4b): increasing in rate as the base increases a progressive tax)
  2. ^ American Heritage Archived 2009-02-09 at the Wayback Machine (6). Increasing in rate as the taxable amount increases.
  3. ^ Britannica Concise Encyclopedia: Tax levied at a rate that increases as the quantity subject to taxation increases.
  4. ^ Princeton University WordNet: (n) progressive tax (any tax in which the rate increases as the amount subject to taxation increases)
  5. ^ a b Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), Concepts of Taxation, Dryden Press: Fort Worth, TX
  6. ^ Hyman, David M. (1990) Public Finance: A Contemporary Application of Theory to Policy, 3rd, Dryden Press: Chicago, IL
  7. ^ James, Simon (1998) A Dictionary of Taxation, Edgar Elgar Publishing Limited: Northampton, MA
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  9. ^ "Internal Revenue Service". Archived from the original on August 16, 2007. Retrieved 2009-03-27.CS1 maint: BOT: original-url status unknown (link): The luxury tax is a progressive tax – it takes more from the wealthy than from the poor.
  10. ^ Luxury tax – Britannica Online Encyclopedia Archived 2012-07-07 at Archive.today: Excise levy on goods or services considered to be luxuries rather than necessities. Modern examples are taxes on jewelry and perfume. Luxury taxes may be levied with the intent of taxing the rich...
  11. ^ Clothing Exemptions and Sales Tax Regressivity, By Jeffrey M. Schaefer, The American Economic Review, Vol. 59, No. 4, Part 1 (Sep., 1969), pp. 596–599
  12. ^ a b c Pickett, Kate; Wilkinson, Richard (April 26, 2011). The Spirit Level: Why Greater Equality Makes Societies Stronger. Bloomsbury Press. ISBN 978-1608193417.
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  17. ^ a b Oishi, Shigehiro; Schimmack, Ulrich; Diener, Ed (2012). "Progressive Taxation and the Subjective Well-Being of Nations". Psychological Science. 23 (1): 86–92. doi:10.1177/0956797611420882. PMID 22157676.
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  21. ^ James, Kathryn (2011). "Exploring the Origins and Global Rise of VAT". Journal of Economics. 35 (4): 15–22. SSRN 2291281.
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  32. ^ McBride, William (February 20, 2013). "Comments on Who Pays? A Distributional Analysis of the Tax Systems in All 50 States". Tax Foundation. Retrieved January 2, 2014.
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  36. ^ a b c Mueller, Richard (May 2008). Access and Persistence of Students from Low ‐ Income Backgrounds in Canadian Post ‐ Secondary Education: A Review of the Literature. MESA Project. Educational Policy Institute. SSRN 2256110. students from low income backgrounds are more sensitive to changes in tuition and aid packages than their colleagues from higher income families, as are students attending community colleges compared to universities.
  37. ^ Campbell, Mary; Haveman, R.; Sandefur, G.; Wolfe, B. (2005). "11 Economic inequality and educational attainment across a generation" (PDF). Focus. 23 (3): 11–15. [Implications of increased economic inequality:] Average achievement goes up slightly, but so does the variability of achievement. Average years of schooling increase by less than 1 percent. Inequality, in contrast, increases substantially, by over 8 percent when all four measures of inequality are considered together. Moreover, a higher proportion of students do not complete high school or 11th grade.
  38. ^ Checchi, Daniele (May 2001). "Education, Inequality and Income Inequality". Distributional Analysis Research Programme Papers. 52. Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. income inequality effectively reduces school enrollment, mainly at secondary level.
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  43. ^ Ansell, Ben (2010). From the Ballot to the Blackboard: The Redistributive Political Economy of Education. Cambridge University Press. p. 175. Under conditions of high income inequality and tax progressivity, there will be even greater support for higher education spending even if most people do not receive it
  44. ^ Griffith, Thomas D. (2004). "Progressive Taxation And Happiness". Boston College Law Review. 45 (5): 1363.
  45. ^ Powell, Jim (October 17, 2012). "Class Warfare: The Mortal Enemy Of Economic Growth And Jobs". Forbes. Retrieved February 3, 2014.
  46. ^ a b Kim, Susanna (Sep 19, 2011). "Warren Buffett Rule: Class Warfare or Tax Fairness?". ABC News. Retrieved February 3, 2014.
  47. ^ Egypt constitution panel rejects article on progressive taxation, Ahram Online, 11 Nov 2013, retrieved February 3, 2014
  48. ^ Form 1040 Instructions (2003), 2003 Tax Rate Schedules, p. 74
  49. ^ Form 1040 Instructions (2004), 2004 Tax Computation Worksheet—Line 43, p. 72
  50. ^ "The Distribution of Household Income and Federal Taxes, 2010". The US Congressional Budget Office (CBO). 2013-12-04. Retrieved 2014-01-06.
  51. ^ 26 USC 55. Also see IRS Form 6251 (individuals) and Form 4626 (corporations).
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  53. ^ "Individual income tax rates". ato.gov.au. Australian Taxation Office. Archived from the original on 29 June 2011. Retrieved 15 May 2013.

External links

Dual income tax

The dual income tax system levies a proportional tax rate on all net income (capital, wage and pension income less deductions) combined with progressive tax rates on gross labour and pension income. This implies that labour income is taxed at higher rates than capital income, and that the value of the tax allowances is independent of the income level. The dual income tax system deliberately moves away from the comprehensive income tax (global income tax) system which taxes all or most (cash) income less deductions (net income) according to the same rate schedule. The dual income tax was first implemented in the four Nordic countries (Denmark, Finland, Norway and Sweden) through a number of tax reforms from 1987 to 1993. The dual income tax is therefore also known as the Nordic tax system or the Nordic Dual Income Tax.

Economy of Utah

Utah has a largely mixed economy covering industries like tourism, mining, agriculture, manufacturing, information technology, finance, and petroleum production. The majority of Utah's gross state product is produced along the Wasatch Front, containing the state capital Salt Lake City.

According to the Bureau of Economic Analysis the gross stated product of Utah in 2010 was 82 billion, just over half a percent of the total United States GDP of $14.55 trillion for the same year. The per capita personal income was $36,457 in 2005. Major industries of Utah include: coal mining, cattle ranching, salt production, and government services.

According to the 2007 State New Economy Index, Utah is ranked the top state in the nation for Economic Dynamism, determined by,

"The degree to which state economies are knowledge-based, globalized, entrepreneurial, information technology-driven, and innovation-based."

In eastern Utah petroleum production is a major industry. Near Salt Lake City, petroleum refining is done by a number of oil companies. In central Utah, coal production accounts for much of the mining activity.

Utah collects personal income tax at a single rate of 5%, but provides tax credits to low and middle income taxpayers to provide a progressive tax system. The state sales tax has a base rate of 4.65 percent, with cities and counties levying additional local sales taxes that vary among the municipalities. Property taxes are assessed and collected locally. Utah does not charge intangible property taxes and does not impose an inheritance tax.

As of December 2015, Utah's unemployment rate sat at 3.5%, and ranked 7th out of the 50 states and the District of Columbia.

Equity (economics)

Equity or economic equality is the concept or idea of fairness in economics, particularly in regard to taxation or welfare economics. More specifically, it may refer to equal life chances regardless of identity, to provide all citizens with a basic and equal minimum of income, goods, and services or to increase funds and commitment for redistribution.

Flat tax

A flat tax (short for flat-rate tax) is a tax system with a constant marginal rate, usually applied to individual or corporate income. A true flat tax would be a proportional tax, but implementations are often progressive and sometimes regressive depending on deductions and exemptions in the tax base. There are various tax systems that are labeled "flat tax" even though they are significantly different.

Labor Left

The Labor Left (also known as the Socialist Left and Progressive Left) is an organised Left faction of the Australian Labor Party. It competes with the more fiscally conservative Labor Right faction.

The Labor Left operates autonomously in each State and Territory, and organises as a broad alliance at the national level. Its policy positions include party democratisation, economic interventionism, progressive tax reform, refugee rights, gender equality and gay marriage.

Progression

Progression may refer to:

In mathematics:

Arithmetic progression, sequence of numbers such that the difference of any two successive members of the sequence is a constant

Geometric progression, sequence of numbers such that the quotient of any two successive members of the sequence is a constant

Harmonic progression (mathematics), sequence of numbers such that their reciprocals form an arithmetic progressionIn music:

Chord progression, series of chords played in order

Backdoor progression, the cadential chord progression from iv7 to I, or flat-VII7 to I in jazz music theory

Omnibus progression, sequence of chords which effectively divides the octave into 4 equal parts

Ragtime progression, chord progression typical of ragtime music and parlour music genres

Progression, music software for guitarists

Progression, Markus Schulz's second Artist Album, released in 2007In other fields:

Age progression, the process of modifying a photograph of a person to represent the effect of aging on their appearance

Cisternal progression, theory of protein transport through the Golgi apparatus inside a cell

Color progression, ranges of color whose values transition smoothly through a hue, saturation, luminance, or any combination of the three

Horizontal progression, the gradual movement from left to right during writing a line of text in Western handwriting

A progressive tax is a tax by which the tax rate increases as the taxable amount increases

Semantic progression, evolution of word usage

Educational progression, an individual's movement through stages of education and/or training

Progress tracking in video games

Astrological progression, used in Horoscopic astrology to forecast future trends and developments.

Progressivism (disambiguation)

Progressivism is a broad political movement.

Progressivism may also refer to:

Progressive Party (disambiguation), multiple political organizations

Progressive education, belief that education must be based on the principle that humans are social animals who learn best in real-life activities

Progressive tax, increases as the taxable base amount increases

Progressive Era, a period of reform in the United States that flourished from the 1890s to the 1920s

Proportional tax

A proportional tax is a tax imposed so that the tax rate is fixed, with no change as the taxable base amount increases or decreases. The amount of the tax is in proportion to the amount subject to taxation. "Proportional" describes a distribution effect on income or expenditure, referring to the way the rate remains consistent (does not progress from "low to high" or "high to low" as income or consumption changes), where the marginal tax rate is equal to the average tax rate.It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Proportional taxes maintain equal tax incidence regardless of the ability-to-pay and do not shift the incidence disproportionately to those with a higher or lower economic well-being.

Flat taxes are defined as levying a fixed (“flat”) fraction of taxable income. They usually exempt from taxation household income below a statutorily determined level that is a function of the type and size of the household. As a result, such a flat marginal rate is consistent with a progressive average tax rate. A progressive tax is a tax imposed so that the tax rate increases as the amount subject to taxation increases. The opposite of a progressive tax is a regressive tax, where the tax rate decreases as the amount subject to taxation increases.

The French Declaration of the Rights of Man and of the Citizen of 1789 proclaims: A common contribution is essential for the maintenance of the public forces and for the cost of administration. This should be equitably distributed among all the citizens in proportion to their means.

Regressive tax

A regressive tax is a tax imposed in such a manner that the average tax rate (tax paid ÷ personal income) decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, so that the average tax rate exceeds the marginal tax rate. In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich: there is an inverse relationship between the tax rate and the taxpayer's ability to pay, as measured by assets, consumption, or income. These taxes tend to reduce the tax burden of the people with a higher ability to pay, as they shift the relative burden increasingly to those with a lower ability to pay.

The regressivity of a particular tax can also factor the propensity of the taxpayers to engage in the taxed activity relative to their resources (the demographics of the tax base). In other words, if the activity being taxed is more likely to be carried out by the poor and less likely to be carried out by the rich, the tax may be considered regressive. To measure the effect, the income elasticity of the good being taxed as well as the income effect on consumption must be considered. The measure can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime.

The opposite of a regressive tax is a progressive tax, in which the average tax rate increases as the amount subject to taxation rises In between is a flat or proportional tax, where the tax rate is fixed as the amount subject to taxation increases.

Revenue Act of 1862

The Revenue Act of 1862 (July 1, 1862, Ch. 119, 12 Stat. 432), was a bill the United States Congress passed to help fund the American Civil War. President Abraham Lincoln signed the act into law on July 1, 1862. The act established the office of the Commissioner of Internal Revenue, a department in charge of the collection of taxes, and levied excise taxes on most items consumed and traded in the United States. The act also introduced the United States' first progressive tax with the intent of raising millions of dollars for the Union.

Revenue Act of 1935

The Revenue Act of 1935, 49 Stat. 1014 (Aug. 30, 1935), raised federal income tax on higher income levels, by introducing the "Wealth Tax". It was a progressive tax that took up to 75 percent of the highest incomes.It was signed into law by President Franklin D. Roosevelt.

The 1935 Act also was popularly known at the time as the "Soak the Rich" tax. To solve the problem of tax evasion through loopholes, the Revenue Act of 1937 revised tax laws and regulations to increase the efficacy of the tax.

Suits index

The Suits index of a public policy is a measure of tax progressiveness, named for economist Daniel B. Suits. Similar to the Gini coefficient, the Suits index is calculated by comparing the area under the Lorenz curve to the area under a proportional line. For a progressive tax (for example, where higher income tax units pay a greater fraction of their income as tax), the Suits index is positive. A proportional tax (for example, where each unit pays an equal fraction of income) has a Suits index of zero, and a regressive tax (for example, where lower income tax units pay a greater fraction of income in tax) has a negative Suits index. A theoretical tax where the richest person pays all the tax has a Suits index of 1, and a tax where the poorest person pays everything has a Suits index of −1. Tax preferences (credits and deductions) also have a Suits index.

Sunny Afternoon

"Sunny Afternoon" is a song by the Kinks, written by chief songwriter Ray Davies. The track later featured on the Face to Face album as well as being the title track for their 1967 compilation album. Like its contemporary "Taxman" by The Beatles, the song references the high levels of progressive tax taken by the British Labour government of Harold Wilson. Its strong music hall flavour and lyrical focus was part of a stylistic departure for the band (begun with 1965's "A Well Respected Man"), which had risen to fame in 1964–65 with a series of hard-driving, power-chord rock hits.

Tax bracket

Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, although this is much rarer). Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.

Taxation in Belgium

In Belgium, taxes are collected on both state and local level. The most important taxes are collected on federal level, these taxes include an income tax, social security, corporate taxes and value added tax. At the local level, property taxes as well as various fees are collected. Tax revenue stood at 48% GDP in 2012.The effective taxation rate in Belgium is commonly cited as among the highest in the world; see list of countries by tax rates.

Income tax is calculated by applying a progressive tax rate schedule to taxable income, with rates that go from 25% to a maximum rate 50%. The rates, as of 2015, are as follows:

Furthermore, a long list of tax allowances can be deducted from both the employer and the employee, including a general deduction, benefits deduction, and a deduction for dependents. Tax deductions are granted according to the following table:

Child benefits:

Employer - 7%

Employee - 0%

Unemployment:

Employer - 1.46%

Employee - 0.87%

Medical care in the case of sickness:

Employer - 2.35%

Employee - 1.15%

Occupational illnesses:

Employer - 1%

Employee - 0%

Industrial accidents:

Employer - 0.30%

Employee - 0%Employment income is also subject to social security contributions. Employee contributions are 13.07% and are deducted by the employer. In addition, the employer contributes about 35% of employees wage. No ceiling for contributions apply on contributions for either employee and employer.Value-Added Tax (VAT) applies to most sales of goods and services. The standard rate of value-added tax is 21%. A lower rate of 12% applies to social housing, meals and margarine. Another reduced rate of 6% applies to foods, drinks, hotels and medicine. Certain goods and services are exempted from VAT by law, this includes exports, and financial services. The Belgian VAT is part of the European Union value added tax system. Smaller businesses with a turnover lower than €25000 are exempt as of 01/01/2016.

Corporate tax applies at a standard rate of 33.99%.The effective corporate tax rate in Belgium can be lowered through the use of various tax schemes. In 2016 the European Commission ruled that a Belgian corporate tax scheme, which had provided tax breaks to 35 multinational companies was illegal.Anheuser-Busch InBev is known to benefit from a very low effective corporate tax rate in Belgium, where the company has its headquarters.

Taxation in Denmark

Taxation in Denmark consists of a comprehensive system of direct and indirect taxes. Ever since the income tax was introduced in Denmark via a fundamental tax reform in 1903, it has been a fundamental pillar in the Danish tax system. Today various personal and corporate income taxes yield around two thirds of the total Danish tax revenues, indirect taxes being responsible for the last third. The state personal income tax is a progressive tax while the municipal income tax is a proportional tax above a certain income level.

Taxation in Taiwan

Taxes provide an important source of revenue for various levels of the Government of the Republic of China. The tax revenue of Taiwan in 2015 amounted NT$2.1 trillion.

Taxman

"Taxman" is a song by the English rock band the Beatles and released as the opening track on their 1966 album Revolver. Written by the group's lead guitarist George Harrison, its lyrics attack the high levels of progressive tax taken by the British Labour government of Harold Wilson.

Trade Union Advisory Committee to the OECD

The Trade Union Advisory Committee to the OECD (TUAC) is the interface of the Organisation for Economic Co-operation and Development (OECD) with organized labour. TUAC has 59 affiliated trade union centres in 31 OECD countries, representing more than 66 million workers. It also has associate members in Brazil, Indonesia, Russia and South Africa.

In recent years, TUAC has focused on the response to the economic crisis, stressing the need for anti-crisis policies that stimulate growth and protect and create jobs, together with stronger regulation of the financial sector. TUAC calls for a paradigm shift in the underlying economic model so as to deliver a stronger global economy that reduces income inequality. It supports policies that promote aggregate demand, green growth, sustainable and inclusive development, responsible long-term investments and financial markets, as well as fair and progressive tax systems.

To this end, TUAC actively participates in various OECD Committees and conferences, including the OECD Forum and Ministerial Council Meeting.

TUAC, working with the International Trade Union Confederation (ITUC) co-ordinates trade union input to the G20 and G8 Summits through the L20, and took part in the G20 Employment Task Force and Sherpa meetings, as well as in social partners consultations with Ministers and Leaders. It also co-ordinated trade union input in the book Exiting from the crisis: towards a model of more equitable and sustainable growth .TUAC and its Global Union partners have also contributed to the update of the OECD Guidelines for Multinational Enterprises. TUAC has launched a database and website of trade union cases submitted under the Guidelines since 2000.

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