Progressive tax systems are designed to subject a larger percentage of income to taxation for individuals, households and businesses with larger incomes, while lowering the tax burden on those with lower incomes. According to Progressive Policy Institute, the debate between flat and progressive tax systems is robust, with valid arguments on each side. Progressive taxes carry significant benefits to economically disempowered households and society as a whole.
Income Distribution Inequality
A principle benefit of progressive taxes is the ability to offset inequalities in income distribution. Progressive proponents argue that under a flat tax system, economically struggling households must sacrifice a larger portion of their purchasing power to tax obligations than higher income households, and progressive taxes serve to correct this imbalance.
Benefits to Society
A progressive tax system allows a government to collect a larger amount of tax revenue, which, according to a research paper on sciforums.com, can be used for the benefit of public services, such as education, welfare and medical assistance.
Small Business Benefits
The smaller tax burden placed on lower-income entities in a progressive tax scheme allows small businesses to increase their net income, providing further stimulus for small business formation and growth.
Household Benefits
The same benefits experienced by small businesses are also experienced by individuals and households. Due to the smaller tax burden, economically struggling families will find themselves with extra money to pay bills and additional purchasing power.
Macroeconomic Benefits
The net increase in household and small business purchasing power translates into higher revenues for organizations across a significant number of industries, which can serve to boost macroeconomic performance.