Question

Are Social Security taxes progressive, regressive or proportional? Is federal income tax progressive, regressive or proportional? Why? What about the tax system as whole, is it progressive, regressive or proportional? Why?

Answer 1

Social Security taxes are regressive in nature. As for Social Security Tax there is a cap on the total amount that can be collected due to which those who earn less contribute 15.3% of there income flat. There is no deduction allowed. Whereas there is no social security tax on income over $117k. Thus people earning more than that are paying no extra taxes, and hence it is a regressive tax.

Whereas Income tax is a progressive tax. People who earn more are expected to pay more tax. The tax rates for different slabs vary from 10% to 40%. Also there is no maximum cap. Thus who earn more will pay proportionately more as taxes.

Overall US tax system is progressive in nature. Although there are a few regressive taxes but they in value they are lesser than the progressive ones. Corporate and individual tax are both progressive whereas medical, excise and social security are regressive but overall it is more progressive in nature and thus overall a progressive one.