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Finance and Taxation A progressive tax is a tax by which the tax rate increases as the taxable amount increases.[1][2][3][4][5] "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate.[6][7] It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes attempt to reduce the tax incidence of people with a lower ability-to-pay, as they shift the incidence disproportionately to those with a higher ability-to-pay. The term is frequently applied in reference to personal income taxes, where people with more disposable income pay a higher percentage of that income in tax than do those with less income. It can also apply to adjustment of the tax base by using tax exemptions, tax credits, or selective taxation that would create progressive distributional effects. For example, a sales tax on luxury goods or the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption or decreases a tax burden on low end consumption respectively.[8][9][10] The opposite of a progressive tax is a regressive tax, where the tax rate decreases as the amount subject to taxation increases.[11][12][13][14] In between is a proportional tax, where the tax rate is fixed as the amount subject to taxation increases.[5] The idea of a progressive tax has garnered support from economists and political scientists of many different ideologies - ranging from Adam Smith to Karl Marx, although there are differences of opinion about the optimal level of progressivity. Some economists[15] trace the origin of modern progressive taxation to Adam Smith, who wrote in The Wealth of Nations
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