Degressivity

Degressivity is a term used in economics, public finance, and related fields to describe a relationship in which the rate of change of one variable declines as the level of another variable increases. In mathematical terms, a degressive relationship is typically associated with concave functions, where incremental gains or costs become smaller at higher levels of the input.

In policy and taxation, degressivity refers to schemes where the burden or benefit per unit of the base decreases as the base grows. This can appear in tax design, subsidies, or co-financing rules. A degressive tax might apply higher marginal rates at lower income levels and progressively lower rates as income rises, or apply a tapering schedule where the proportional tax or contribution falls with the size of the base. In public funding, degressive co-financing means the government's share of a grant or project funding decreases as the grant size increases, reflecting diminishing returns or aiming to prioritize smaller projects.

Example: a hypothetical tax applies 20% on the first 50,000 of income, 15% on income between 50,000 and 150,000, and 10% on income above 150,000. As income grows, the marginal rate falls, illustrating degressivity.

Degressivity is distinct from progressive or proportional schemes and is often discussed in policy design and fiscal theory. It can be used to target small-scale activities or to avoid over-concentration of support, but it can raise debates about equity, efficiency, and administrative complexity. See also concavity, diminishing returns, and tax policy terminology.