Most nations, including the U.S., feature both progressive and regressive tax systems. High-income taxpayers end up paying a disproportionately higher share of taxes while low- and middle-income taxpayers pay a lower share of taxes. Under a progressive tax system, taxes are based on a taxpayer’s ability to pay.Īs a result, the average tax burden increases along with a taxpayer’s income. Using our previous example, because of the doctor’s higher annual income, the doctor will have to pay more taxes than the retail worker based on Canada’s federal tax rates of 2022.A progressive tax is one of two main types of tax systems used by a country. Canada has a progressive income tax system therefore, high-income taxpayers pay a progressively higher percentage of tax than low-income taxpayers. Progressive taxes increase based on your taxable income. Progressive taxes are the opposite of regressive taxes. The GST is 0.17% of the retail worker’s income The GST is 0.03% of the doctor’s income This is known as a regressive tax because it has a larger percentage impact on lower income individuals. Although the $50 GST amount is the same for both the doctor and the retail worker it is a higher percentage of the retail workers overall income. They both purchase a laptop for $1,000, and are charged $50 GST ($1,000 X 5%). For example, say a doctor earns $175,000 annually and a retail worker earns $30,000 annually. A regressive tax system affects low-income taxpayers more than high-income taxpayers because it takes a higher percentage of their earnings.Ī great example of a regressive tax is the 5% Goods and Services Tax (GST). Regressive taxes are applied uniformly, and they do not change based on an individual’s level of income. 3 Describe the differences between a regressive, progressive and flat tax.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |