Final answer:
The capital gains tax is considered progressive because higher income levels result in a higher tax rate. This is in contrast to a regressive tax where those with higher incomes pay less proportionally, and a proportional tax which taxes all income levels at the same rate.
Step-by-step explanation:
The capital gains tax is considered controversial for a few reasons, and one perspective is that it is progressive. A progressive tax is structured so that those who earn more pay a higher percentage of their income in tax.
For example, if a gift tax had a rate of 10% for amounts up to $100,000 and 20% for anything over that amount, it would be classified as progressive because larger gifts, which would likely be given by those with higher incomes, are taxed at a higher rate.
Conversely, a regressive tax is where those with higher incomes pay a smaller share of their income, which could disproportionately affect lower-income earners. On the other hand, a proportional tax is a flat percentage of income earned, regardless of the level of income, but is not typically how capital gains are taxed.