Different types of taxes can have a big effect on income inequality in our economy. Let’s break this down.
Progressive Taxes: These taxes are designed so that people who make more money pay a higher percentage. This helps to reduce the gap between wealthy and lower-income individuals. For example, in the U.S., the federal income tax system has rates that can go up to 37% for those with higher incomes.
Regressive Taxes: These taxes hit lower-income families harder. For example, sales taxes can take a bigger chunk of money from those who earn less. Families making under 500,000 only spend about 2.4%.
Impact of Tax Policies: Research shows that if we raise progressive tax rates by just 10%, we can lower income inequality by about 1.5%.
All in all, how we structure taxes is really important for making the economy fairer for everyone.
Different types of taxes can have a big effect on income inequality in our economy. Let’s break this down.
Progressive Taxes: These taxes are designed so that people who make more money pay a higher percentage. This helps to reduce the gap between wealthy and lower-income individuals. For example, in the U.S., the federal income tax system has rates that can go up to 37% for those with higher incomes.
Regressive Taxes: These taxes hit lower-income families harder. For example, sales taxes can take a bigger chunk of money from those who earn less. Families making under 500,000 only spend about 2.4%.
Impact of Tax Policies: Research shows that if we raise progressive tax rates by just 10%, we can lower income inequality by about 1.5%.
All in all, how we structure taxes is really important for making the economy fairer for everyone.