Progressive Tax
A tax system where the rate increases as the taxable amount increases, so higher earners pay a larger percentage of income.
What is Progressive Tax?
A progressive tax applies higher marginal rates to higher levels of income, so the effective tax burden increases as income rises. The U.S. federal income tax is the most prominent example, with seven brackets ranging from 10% to 37% for 2024. Only income within each bracket is taxed at that bracket's rate—not the entire income. Progressivity is justified on the grounds that higher earners have a greater ability to pay and experience diminishing marginal utility from additional income. Progressive systems contrast with flat taxes (one rate) and regressive taxes (where lower earners pay a higher effective rate).
Example
A single filer earning $100,000 in 2024 is not taxed at 22% on the full amount. The first $11,600 is taxed at 10%, the next $35,550 at 12%, and income from $47,150 to $100,000 at 22%. The effective (average) tax rate is approximately 17%—well below the 22% marginal rate—illustrating how progressive brackets work.