The difference between a flat tax rate and a progressive tax rate lies in how the tax is applied based on income levels:
- A flat tax rate applies a single, uniform percentage rate to all taxpayers regardless of their income. Everyone pays the same percentage of their income in taxes, with no deductions or exemptions (in most cases). It is simple and treats all income levels equally by percentage, but critics argue it disproportionately burdens lower-income earners while benefiting the wealthy.
- A progressive tax rate, on the other hand, has multiple tax brackets where the tax rates increase as the taxpayer's income increases. People with higher incomes pay a higher percentage of their income in taxes than those with lower incomes. This system is designed to be more equitable by reducing the tax burden on low-income earners and taxing higher earners more to address income inequality.
In summary, a flat tax charges everyone the same rate regardless of income, while a progressive tax charges higher rates on higher income levels, aiming for a fairer distribution of the tax burden.