Progressive Tax

What it is:

A progressive tax is one in which the tax rate increases as the amount being taxed increases. Most western countries use a progressive tax in one way or another.

How it works/Example:

Federal income tax in America is considered a progressive tax. There are income tax-brackets to assure this.

As you can see, those who make the least amount of money owe the lowest marginal tax rate. The more money one makes, the higher the tax rate.

This table can be a little confusing without further explanation. Please note that everyone is taxed in steps. A person earning $100,000 is not taxed 28% on the entire amount. Instead, he is taxed 10% on the first $8,350 earned, 15% for the portion up to $33,950, 25% for the portion up to $82,250, and 28% for the remainder:

This clarification is important to quell some misleading rumors. It has been suggested that if an employee earning $33,950 (take home after taxes: $28,857) is offered a $5 pay raise (enough to boost him into the next tax bracket), it will actually decrease the total amount he takes home (suggested take home after taxes: $25,466). But this is incorrect. Only the $5 above $33,950 will be taxed the higher 25%. In this case, his ACTUAL after taxes take home would be $28,861.

Why it Matters:

A progressive tax is one of many systems governments use to raise revenue.

The idea of a progressive tax has always been debated. Backers of a progressive tax argue that people with higher incomes (and presumably, higher discretionary income) can more easily afford a higher tax burden. 

Opponents tend to claim that it punishes high earners for their success and eliminates monetary incentives for workers wanting to increase their income level. These are a few of the most basic talking points in what has become a very complex conversation.

Taxation is one of the most widely (and heatedly) debated topics out there, with many people arguing for and against certain systems. The progressive tax is no exception.

--------------------------------------------------------------------------------------------------------------

Whether it's April 14th or April 16th, we can all do more to minimize the stress of tax season. For most of us, the task is so overwhelming that we put it off until we just can't put it off anymore.  To prevent this year from being a repeat of the last, here are 10 Ways to Make Tax Season Less Painful.

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.