Progressive tax was first put forward by Helvetius with the purpose of achieving an equitable distribution of wealth but has later become an obstacle to promoting savings. This paper proposed the perspective of the contribution theory, divides income into production income and wealth income. Production income is generated by the government's contribution to the environment and therefore is imposed with general tax rates. Thus, the incentives for savings and encouragement for work will not be hindered. On the other hand, wealth income involves risk and luck and is susceptible to external influences. It does not necessarily reflect the government's contribution, nor does it carry any correspondent relationship with the amount of the government's contribution. In order for the public to share the cost of risk and luck and to dampen speculative activities and underground economy, progressive tax should be imposed on wealth income. Imposing general tax on production income and progressive tax on wealth income, in effect, take into account of both the economic and social dimension.
International Journal of Management 20(2), 10 pages