What is the difference between a proportional tax and a prog

What is the difference between a proportional tax and a progressive tax? What are the problems of progressive taxation as a means to achieve greater equality in income distribution?

Solution

Difference between proportional tax and progressive tax:

If the tax rate is constant and chargeable to any level of income then this is proportional tax. Therefore, the amount of tax increases as the level of income increases incase of proportional tax system.

If an individual pays higher tax because of higher tax rate applicable for higher income then this is progressive tax. This is a tax system where tax rate increases as the income increases. The tax system of the USA is progressive.

Problems of progressive taxation:

The richer section of the society gets access to enter into capital through progressive tax system. They have no problem of paying high tax while concentrating wealth. It creates unequal income distribution.