Introduction

There are three main categories of taxation in the United States: progressive, proportional, and regressive. The middle and upper classes are affected differently by the two of them. Regressive taxes are felt more acutely by people with lower incomes than those with higher incomes. People of all income levels are affected similarly by a proportional tax, sometimes known as a flat tax. There is one flat tax rate that applies to all income levels. With a progressive tax, those with higher incomes pay a more significant percentage than those with lower incomes.

Definition of Regressive Taxes:

One definition of a regressive tax structure is unfairly targeting those with lower earnings by taxing them at a higher rate. This is because taxpayers' tax bills are determined relative to their total assets. Thus, this is not a tax that increases in proportion to one's income level. Regressive taxation includes property, sales, and excise taxes on things like gas and plane tickets. The ultimate price for a product or service consists of the cost of any relevant excise taxes.

Sin taxes are excise taxes placed on vices like smoking, gambling, and alcohol consumption because of their perceived adverse effects on society. They're put in place to make those products more expensive for consumers. One argument against sin taxes is that the impoverished are the ones who suffer the most. Many people believe that the government should not tax their Social Security income. Wages over the wage base are not subject to Social Security taxation in the following years. This price cap goes up to $147,000 in 2022 from 2021's $142,800.

There is a cap of $9,114.00 on the Social Security taxes you'll owe in 2022, regardless of how much money you make each year (between $147,000 and $1,000,000). Employers cover the additional 6.2% on workers' behalf, but the self-employed must cover the whole amount on earnings above the wage base. Since the Social Security tax rate is the same for all workers and the cap reduces the amount that can be withheld from each paycheck, higher-income workers contribute a smaller fraction of their total salary than those with lower incomes.

Taxes in Ratio:

Regardless of their financial situation, every citizen would be subject to the same tax rate under a proportionate or flat tax system. The theory behind this approach is to equalize the gap between the marginal and average tax rates. As of January 2022, nine states have adopted this levy income tax method. Other forms of proportional taxes are per capita, gross receipts, and occupational taxes. Proponents of proportional taxes claim that they promote the economy and motivate individuals to work harder because they impose no additional tax responsibility on those with higher incomes. Businesses are expected to spend and invest more under a flat tax system, which is expected to boost economic growth.

Taxes that increase steadily over time:

In a progressive tax system, one's income is the primary determinant of one's tax bracket. They are progressive, with higher rates for those with higher incomes than those with lower ones. As one's wealth increases, so do one's tax rate and liability. The result is that those with higher incomes pay a larger share of their income in taxes and more in total taxes than those with lower incomes. To reflect the assumption that they can afford to pay more, this system is designed to affect those with higher incomes more than those with lower or middle incomes. Americans spend a progressive tax on their income at the federal level.

Under this proposal's marginal tax rate schedule, those with higher earnings will pay a higher rate than those with lower incomes. With each increment of taxable income, the percentage rate rises. When an individual's income reaches a specific threshold, the tax rate increases since they are now part of a higher income bracket. A significant feature of the progressive nature of the federal income tax in the United States is the standard deduction, which allows individuals to avoid paying tax on the first portion of their income each year. The standard deduction is increased or decreased annually to account for inflation. If claiming the standard deduction will result in smaller tax savings, taxpayers might choose to itemize their deductions instead. With the help of deductions and credits, many low-income Americans pay zero federal income tax.

Conclusion:

The three tax groups are defined by the income brackets they serve. Progressive taxes are similar to a downward escalator in that the share of income that goes toward payment reduces as one's income. Regressive taxes are identical to an upward escalator in that the proportion of tax due grows in ratio to declining revenue. Regarding fairness, proportional taxes are similar to the moving walkways you may find in an airport, with the percentage remaining constant regardless of one's financial situation.