What is a progressive tax?

Are you going to have to assume a progressive tax and do not know what this entails? The progressive tax is one of the classifications into which the various taxes that are part of the financing of a State are divided. The problem is that, as with many of the economic terms employees in our day to day, we do not know what this type of tax nor how it works. Therefore, we are going to try to explain what a progressive tax is and what types of it exist. assessment.

A progressive tax is one whose tax rate increases as the tax base increases. This means that the higher the income, the more this tax will be paid. What this type of impuesto is to redistribute the tax burdens of individuals by paying more money the greater the economic capacity they have and less when they have less purchasing power.

There are many criticisms of this type of tax, as it is believed that it can reduce economic growth. But the only objective of the progressive tax is to relieve the economic pressure on those who have fewer resources and thus allow them. In fact, it is not simply paying more for the fact that you have more money. The basis that establishes what is paid is the income or available resources of each one and it is understood that the better the economic capacity, the more tax can be borne.

A clear example of progressive tax in Income Tax, since the higher the income received, the greater the amount of tax must be paid.

What types of progressive taxes can we find?

Within the progressive taxes we can find several types, which are determined by the type of progressivity that is applied to them:

  • Tax with limited or degressive progressivity: in this case the rate increases when the tax base grows, although this increase is smaller and smaller.
  • Tax with unlimited or absolute progressivity: there is no restriction regarding the increase in the percentage to be paid based on the tax base.
  • Tax with progressivity by class: several classes of income are set and a type of rate is assigned to each one.
  • Tax with continuous progressivity: each income segment has a different rate percentage, even if the difference between the income is minimal.
  • Tax with progressivity by steps: certain income steps are established and a type of tax is assigned tribute different for each step.

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