How Progressive Taxation Really Works

In the United States, an enormous amount of confusion surrounds the system of progressive taxation. Most Americans understand progressive taxation to mean that people with higher incomes pay more in taxes than people with lower incomes. Far too many people insist, however, that progressive taxation penalizes economic aspiration, believing that if they earn “too much” their taxes will spike, wiping out any overall growth in income.

This is nonsense, as this post from the Daily Kos makes clear. Briefly: progressive marginal tax rates mean that you pay a higher rate on income above (but not below) certain bracket levels. If your income increases, only the amount above the bracket level is taxed at the higher rate.

It has become common for many on the “libertarian” right to argue that a flat tax system would be fairer than progressive taxation: everyone would pay the same percentage tax rate, regardless of their income. The problem with such a system is that someone earning $25,000 per year spends a larger proportion of his/her income on necessities (housing, food) than does someone earning $250,000 per year. Taxing both individuals at the same rate actually puts a greater burden on ordinary workers than on the wealthy.

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