The progressive tax system is most evident in the tax, tax is levied at a rate that increases as the amount of income increases. This system was designed to collect a larger share of tax revenue from wealthy people reflect ability to pay principle. Usually progressive tax is the stabilizing force in periods of inflation or recession because the amount of income tax changes more than proportionately with an increase or decrease in income.

In an economy where prices and incomes rise, the dollar value of tax credits and payments will remain constant. But as individual income increases, the taxpayer has moved into a higher tax bracket. This means that a greater percentage of their income goes towards taxes. Meanwhile, the government’s tax revenues rise. What does this mean? Simply put, the higher the taxable income, the more money given to the government to spend on programs and strengthen the overall economy. Whether by reducing tax rates or increase the consumption of government that can stimulate or restrict private demand.

There are negative effects of progressive taxation. During inflation, it can actually hurt the people that this system is to try to help by shifting the tax burden to less able and increasing power of government to steer the economy. There is no real solution to this. Also, many believe that this type of taxation is punishing the rich to work and earn their money. This may be true in a degree, but a fixed rate for all people will cause more harm than good. Also, tax payers at the lower end of the scale pay recessive taxes that are involved in the American system. So the rich can pay more taxes, the poor, like the one with recessive taxes. In this system, tax payers end up paying for what they use.

Progressive taxation is not a perfect plan. But under the limits and restrictions that lawmakers have spent on this system, progressive taxation makes the whole community. The proposed tax cut in Bush’s plan is more of a tax break. It will give tax relieve for the rich and cause recessive taxes should be increased. This will only mean that the lower end of the tax brackets will pay the difference. Hopefully, lawmakers will see that Bush’s tax-cut plan should be reviewed and allow for the progressive taxation system to work.