Question

A progressive income tax always raises more revenue than a proportional income tax does. Do you agree or disagree? Explain your answer.

Short answer

The assertion that progressive income tax always raises more revenue than a proportional income tax is not necessarily true. It depends on the specifics of the tax rates and the income distribution in the society.

Step-by-step solution

Understanding Progressive Income Tax

A progressive income tax is a tax structure in which the tax rate increases as the taxable income increases. This means that individuals or entities with higher incomes bear a higher tax burden, while those with lower incomes bear a proportionately lower tax burden. The principle behind this system is to bring about income and wealth redistribution, making it fair for lower-income individuals.

Understanding Proportional Income Tax

On the other hand, a proportional income tax (also known as a flat tax) is where everyone is charged the same rate, regardless of their income. This means that whether an individual's income is high or low, they will pay the same percentage of their income in taxes. The tax burden is distributed uniformly among taxpayers.

Evaluating Revenue Generation

The statement that a progressive income tax always raises more revenue than a proportional income tax isn’t always true. While a progressive tax could generate more income if there are a significant number of high-income earners, a proportional tax might bring in more revenue in a society where income is more evenly distributed. The amount of revenue generated depends on the specifics of the tax rates, the income distribution in the society, and the economy's structure.