Answer :
Tax rates grow as income levels rise in a progressive tax scheme. The theory of redistributive justice, which ensures fairness by taxing higher incomes proportionately more, is the foundation of the economic justification.
A system where tax rates climb as income levels do is known as a progressive tax structure. Its economic justification is founded on the idea of redistributive justice, which aims to distribute taxes more fairly. It acknowledges that while those with lower earnings can find it difficult to meet their fundamental necessities, those with higher incomes are better able to pay taxes without suffering major negative consequences on their well-being. A progressive tax system contributes to social and economic fairness, the reduction of income disparity, and the provision of funds for public services and goods that benefit the entire community. It makes sure that those who can afford to contribute more do so, encouraging a feeling of equity and fairness.
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A progressive tax system requires individuals with higher incomes to pay a larger percentage of their income in taxes. While it is designed for tax equity and the ability-to-pay principle, there is debate over whether it leads to economic inefficiency. The fairness of progressive taxes is a reflection of societal values on wealth distribution and fiscal obligations.
A progressive tax system is structured such that individuals or entities with higher incomes pay a larger percentage of their income in taxes, as opposed to merely a higher absolute amount. This system is designed to increase the tax burden on those most able to afford it, which reflects one of the key learning objectives within taxation: tax equity. Under this system, tax equity is aligned with the principle of the ability to pay, suggesting that those with greater financial means should contribute more to society's infrastructure and services.However, the economic rationale for a progressive tax system can be subject to debate. Some policymakers argue that progressive taxes create a disincentive for individuals to earn more—essentially penalizing income-related success. They propose that such a system might lead to a decrease in Gross Domestic Product (GDP) in comparison to a proportional tax structure due to what is seen as a loss of economic efficiency.
The counterargument is that a progressive tax system fosters social equity by asking more from those who have benefited most from the economic system, while providing relief to those at the lower end of the income scale.The concept of 'fairness' in taxation is central to these debates. It reflects the social values each society holds about wealth distribution, social welfare, and the obligations of citizens within their economic context. Advocates of the progressive tax structure argue that it is a fair way to fund societal needs, as it takes into account the disparities in wealth and income levels among taxpayers.
