Final answer:
A progressive tax system increases the tax rate as income increases, causing high-income individuals to pay a higher percentage of their income in taxes. Returning carbon tax revenue to households is considered more progressive than general spending because it helps ensure lower-income households are not unduly burdened by such taxes and aligns with the principles of equity in taxation.
Step-by-step explanation:
A progressive tax is a system in which the tax rate increases as the taxable income increases. This means that individuals with higher incomes pay a larger percentage of their income in taxes compared to those with lower incomes. Returning carbon tax revenue directly to households can be considered more progressive than using it for general spending because it ensures that the tax burden does not disproportionately affect lower-income households. The direct refund can act as an economic equalizer and potentially offset the costs these households would incur as a result of the carbon tax.
In contrast, general government spending may not have the same direct or immediate impact on the economic well-being of lower-income households. Moreover, this approach aligns with the principles of a progressive tax system, supporting the notion that those with greater ability to pay should contribute a higher share of their income towards taxes. It is also considered more equitable and fair, as it alleviates the regressivity that might be inherent in consumption-based taxes like carbon taxes. This is because lower-income households tend to spend a higher proportion of their income on energy and fuel, which are directly affected by carbon pricing.