Progressive taxes are those that charge a higher percentage on individuals who have a higher income. Proponents of progressive taxes argue that they are effective because the rich have a greater ability to pay than the poor. Opponents of progressive taxes say it is unfair to tax one group more than another. Examples of progressive taxes include the United States federal income tax, the federal estate tax and the gift tax.
Federal Income Tax
In 2012, the first $8,700 of income for single people is taxed at a rate of 10 percent. Income between $8,701 and $35,350 is taxed at 15 percent. The rate continues to increase as income increases to a maximum tax rate of 35 percent for income over $388,350.
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Federal Estate Tax
The estate tax in the United States is only charged on estates valued at over $5.12 million. There are also several deductions that can reduce the value of a farm by $820,000 or the value of a small business by $1,100,000. According to the Internal Revenue Service, this tax only affects the wealthiest 1 percent of Americans. For estates valued at less than $5,120,000, the tax rate is zero.
The gift tax is similar to the estate tax in that the tax only applies to expensive gifts, making it a progressive tax. The gift tax is generally paid by the person giving the gift and does not apply to any gifts of $13,000 per person per year. This means that you could give up to $13,000 in gifts to any number of people and never have to pay the gift tax.