Progressive Tax
Plain definition
A tax system in which the average tax rate rises as income rises, so higher earners pay a larger share of their income.
In economics
Progressive taxation is the main tool for income redistribution: marginal rates climb through brackets, so the first dollars are taxed lightly and later dollars heavily. Economists justify it by diminishing marginal utility of income and by ability to pay, while critics argue high top rates can discourage work and investment.
Example
Under a progressive income tax, the first 30,000 at 15%, and income above 60,000 pays a higher average rate than someone earning $25,000, even though both face the same bracket schedule.
A progressive tax is confused with a proportional (flat) tax and with marginal vs. average rates. Progressive means the AVERAGE rate rises with income. A taxpayer in the 25% bracket does not pay 25% on all income, only on income within that bracket.