GRADUATED TAX Meaning and
Definition
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A graduated tax, also known as a progressive tax, is a system of taxation where the tax rate increases as the taxable income of an individual or corporation increases. In this framework, the tax burden proportionally increases based on the taxpayer's ability to pay. The idea behind a graduated tax is to create a fair and equitable tax system that redistributes wealth and promotes economic equality.
Under a graduated tax system, different income levels are categorized into tax brackets. Each bracket has a specific tax rate that is applied to the corresponding income range. Typically, lower income levels have lower tax rates, while higher income levels are subject to higher tax rates. This progressive approach ensures that individuals with higher incomes bear a larger share of the tax burden.
The purpose of implementing a graduated tax system is multi-fold. It aims to alleviate the tax burden on low-income earners by charging them a lower tax rate, enabling them to meet their basic needs and achieve a certain level of financial well-being. Meanwhile, higher earners are expected to contribute a greater proportion of their income to support public services and programs that benefit society as a whole.
Graduated taxes are prevalent in many countries around the world. They are often seen as a means of addressing income inequality and creating a more just tax system. Advocates argue that this approach ensures that tax collection aligns with the ability to pay, promoting a more balanced distribution of wealth and resources.
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Etymology of GRADUATED TAX
The etymology of the term "graduated tax" can be traced back to the Latin word "gradus", meaning "step" or "grade". In this context, "graduated" refers to a system that involves different steps or levels. The word "tax" originates from the Latin word "taxare", which means "to appraise" or "to assess". Therefore, the etymology of "graduated tax" suggests a system of taxation that increases or decreases in steps or levels based on various factors such as income or property value.
