Progressive Tax

Loading the player...

DEFINITION of 'Progressive Tax'

A tax that takes a larger percentage from the income of high-income earners than it does from low-income individuals. The United States income tax is considered progressive: in 2010, individuals who earned up to $8,375 fell into the 10% tax bracket, while individuals earning $373,650 or more fell into the 35% tax bracket. Basically, taxpayers are broken down into categories based on taxable income; the more one earns, the more taxes they will have to pay once they cross the benchmark cut-off points between the different tax bracket levels.

BREAKING DOWN 'Progressive Tax'

The U.S. progressive income tax is effectively a means of income redistribution. Individuals who earn more pay higher taxes; those taxes are then used to fund social welfare programs that are used primarily by individuals who earn less. Critics of the progressive tax consider it to be discriminatory and believe that a flat tax system, which imposes the same tax on everyone regardless of income, is a fairer method of taxation.

RELATED TERMS
  1. Cascade Tax

    A tax that is levied on a good at each stage of the production ...
  2. Bush Tax Cuts

    A series of temporary income tax relief measures enacted by President ...
  3. Solidarity Tax

    A government-imposed tax levied in an attempt to provide funding ...
  4. Regressive Tax

    A tax that takes a larger percentage from low-income people than ...
  5. Flat Tax

    A system that applies the same tax rate to every taxpayer regardless ...
  6. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
Related Articles
  1. Taxes

    10 States with Highest Income Taxes

    Find out who is actually paying the most state taxes as a percent of their income. California and New Jersey are not in the top 10.
  2. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  3. Taxes

    Explaining Progressive Tax

    A progressive tax is a levy in a tax system where the tax rate increases as the taxable base increases.
  4. Taxes

    A "Kiddie Tax" Overview For Parents

    Understanding how children are taxed is very important when it comes to saving for their college education.
  5. Taxes

    The Most Controversial Tax Deductions

    When it comes to taxes, it's hard to make people happy but these deductions raised more than the average amount of controversy.
  6. Taxes

    Do Tax Cuts Stimulate The Economy?

    Learn the logic behind the belief that reducing government income benefits everyone.
  7. Taxes

    Paying Uncle Sam: From Tobacco To $1 Trillion

    The services we rely on, like education, law and security, were built on taxes.
  8. Fundamental Analysis

    The Evolution of Obamacare Since Its Inception

    Find out whether the Patient Protection and Affordable Care Act, also known as Obamacare, has lived up to its lofty projections from 2010.
  9. Economics

    Understanding Cost-Volume Profit Analysis

    Business managers use cost-volume profit analysis to gauge the profitability of their company’s products or services.
  10. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
RELATED FAQS
  1. Are tax brackets adjusted for inflation?

    Each year, the U.S. Internal Revenue Service (IRS) adjusts tax brackets for changes in the cost of living to calculate federal ... Read Full Answer >>
  2. What is the difference between a regressive tax versus a progressive tax?

    A progressive tax is one that increases along with an individual's ability to pay the tax, while a regressive tax doesn't ... Read Full Answer >>
  3. Are progressive taxes ever more unfair that flat taxes?

    Progressive taxes assign a different tax rate to different taxpayers. Affluent taxpayers pay the highest income tax rates ... Read Full Answer >>
  4. Is a progressive tax more fair than a flat tax?

    Progressive taxation versus flat taxation inspires ongoing debate, and both have proponents and critics. In the United States, ... Read Full Answer >>
  5. Who first came up with the idea of a progressive tax?

    Theodore Roosevelt was the first U.S. president to call for a progressive income tax, which he encouraged Congress to pass ... Read Full Answer >>
  6. Is progressive tax the same thing as marginal tax rate?

    A marginal tax rate is a form of a progressive tax. Any progressive tax is a tax created based on the amount of income an ... Read Full Answer >>
  7. What are the pros and cons of a progressive tax policy and who benefits the most ...

    Those who oppose a progressive tax hierarchy are likely to be those who pay more taxes when such a policy is in place. A ... Read Full Answer >>
  8. What are the differences between regressive, proportional and progressive taxes?

    Tax systems fall into three main categories within the tax code: regressive, proportional and progressive taxes. Regressive ... Read Full Answer >>
  9. Is the marginal tax rate a progressive tax?

    The marginal tax rate is a type of progressive tax system that imposes a higher income tax rate on people with higher incomes, ... Read Full Answer >>
Hot Definitions
  1. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  2. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  3. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  4. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  5. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center