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Categories: General Tax Terms

Progressive Tax

A progressive tax is a tax system in which the tax rate increases as the taxable income rises. This means that individuals or entities with higher incomes pay a larger percentage of their income in taxes compared to those with lower incomes.

For example, in a progressive tax system, the first segment of income may be taxed at a low rate, the subsequent segment at a higher rate, and so forth. This structure aims to reduce income inequality by imposing higher taxes on those who can afford to pay more, helping to fund public services and social programs.

In the United States, federal income tax is an example of a progressive tax, where tax brackets determine the applicable tax rate based on income levels.

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