When the consumer pays a higher tax rate as income increases iscalled what?

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1132397

2026-07-16 06:25

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If a taxpayer's percentage of tax increases with his income, the tax scheme is called a "progressive" tax.

So, for example, say that John is your taxpayer. In a progressive tax system, his tax rate depends on his income meaning that (hypothetically)

If John earns $10,000, then he must pay 10% in income tax.
But, if John earns $20,000, then he must pay 15% in income tax.

The other commonly discussed tax scheme is called a flat tax. This means that no matter what amount of income the taxpayer has, he/she always pays the same amount in tax. Using the same example as above, in a flat tax scheme, John would owe 10% no matter whether he earned $10,000 or $20,000.

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