Progressive tax

progressive tax

A tax with a rate that increases as the amount to be taxed increases. For example, a taxing authority might levy a tax of 10% on the first $10,000 of income and increase the rate by 5% per each $10,000 increment up to a maximum of 50% on all income over $80,000. A progressive tax often uses high rates on relatively large incomes and tends to encourage tax shelters. The federal income tax, many state income taxes, and the unified gift-estate tax are progressive taxes. Compare regressive tax.

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Progressive tax. In a progressive, or graduated, income tax system, taxpayers with higher incomes are taxed at higher rates that those with lower incomes.

Those in favor of this approach say that the greatest tax burden falls on those who can afford to carry it. Opponents argue that it imposes an unfair burden on the people whose ingenuity and hard work make the economy strong.