How does Progressive Tax Work?
Progressive tax systems apply various rates to different income or wealth categories. The idea is that higher-income persons should pay more taxes. In the US, income is taxed in seven bands from 10% to 37%. Wealthier people pay more taxes on their increased income when tax rates rise. This strategy ensures that higher earners contribute appropriately to government income, reflecting the ability-to-pay idea of taxes. Progressive tax systems generally feature tax credits or deductions to reduce tax burdens on low-income taxpayers. Generally speaking, progressive tax systems include tax credits or deductions designed to alleviate the burden on low-income earners. Such credits and deductions may enable individuals with lower salaries pay reduced amounts of tax while providing for their housing, childcare needs as well as education.A larger proportion of taxes is collected from high-earners by means of a progressive tax policy for the purpose of using it on social welfare services and public utilities so as to redistribute wealth among citizens.