SQA National 5 Economics Practice Exam 2026 – Comprehensive Study Resource

Progressive taxation is characterized by a system where the rate of tax increases as an individual's income rises. This means that higher income earners pay a higher percentage of their income in taxes compared to those with lower incomes. The intent behind progressive taxation is to redistribute wealth more equitably within society, addressing income inequality by ensuring that individuals who can afford to contribute more to the public purse do so.

This system contrasts with proportional taxation, where everyone pays the same percentage regardless of income level, and regressive taxation, where lower income individuals pay a higher percentage of their income in taxes compared to wealthier individuals. Flat taxation refers to a single tax rate applied to all taxpayers, independent of their income level. Progressive taxation aims to ease the financial burden on lower income earners while ensuring that those with greater financial capability contribute appropriately to governmental revenues and social services.