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What Is a Progressive Tax?
A progressive tax involves a tax rate that increases or progresses as taxable income increases. It imposes a lower tax rate on low-income earners and a higher rate on those with higher incomes. This is usually achieved by creating tax brackets that group taxpayers by income range.
The income tax system in the U.S. is considered a progressive system. There are seven tax brackets in 2025 with rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. There were 16 tax brackets in 1985.
Key Takeaways
- A progressive tax imposes a higher tax rate on higher taxable incomes.
- A regressive tax is applied uniformly across all ranges of income so it can affect low-income earners more severely.
- A flat tax is also a single income tax rate that applies to all taxable income no matter how much it is or how little.
- The U.S. Social Security payroll tax is considered to be a flat tax but it does have an income cap.
Investopedia / Dennis Madamba
Understanding the Progressive Tax
The rationale for a progressive tax is that a flat percentage on all income would place a disproportionate burden on people with low incomes. The dollar amount owed might be smaller but the effect on their real spending power would be greater.
How progressive a tax structure is depends upon how much of the tax burden is transferred to higher incomes. A tax code with tax rates ranging from 10% to 80% would be more progressive than one with rates ranging from 10% to 30%.
Advantages of a Progressive Tax
A progressive tax system reduces the tax burden on those who can least afford to pay. A single filer only has to pay 10% in federal income tax if they earn $11,925 or less a year as of 2025. Single filers who earn more than $626,350 annually must pay 37% on every dollar of income earned over $626,350.
This leaves more money in the pockets of low-wage earners who are likely to spend more of it on essential goods and services and stimulate the economy in the process.
A progressive tax system tends to collect more taxes than flat taxes or regressive taxes because the highest percentage is collected from those with the highest amounts of money. Those with greater resources fund a larger portion of the services that all citizens and businesses rely on such as road maintenance and public safety.
Disadvantages of a Progressive Tax
Critics of a progressive tax system argue that it’s a disincentive to success. They also oppose the system as a means of income redistribution which they believe punishes the wealthy and even the middle class unfairly.
Opponents of the progressive tax are generally supporters of low taxes and correspondingly minimal government services.
Progressive Tax vs. Regressive Tax
A regressive tax is the opposite of a progressive tax. A rate is applied uniformly across all levels of income so the tax burden decreases as income rises.
A sales tax is an example of a regressive tax. Both individuals would pay the same amount of sales tax on an identical bag of groceries even if one earns $300,000 a year and the other earns $30,000. But the less wealthy individual has shelled out a greater percentage of their income to purchase that food.
Progressive Tax vs. Flat Tax
Like a regressive tax, a flat income tax system imposes the same percentage tax rate on everyone regardless of income. The Federal Insurance Contributions Act (FICA) tax that funds Social Security and Medicare is often considered to be a flat tax because all wage earners pay the same percentage. But the Social Security tax does have an earnings cap. It applies only to income up to $176,100 in 2025. You wouldn’t have to pay this tax on $1,000 of your income if you earned $176,200.
The Medicare tax applies to all wages. There’s no earnings cap on this as there is for the Social Security tax.
Do I Pay the Same Percentage of Tax on All My Income?
No. You only pay your highest percentage tax rate on the portion of your income that exceeds the minimum threshold for that tax bracket.
A single person who earns $100,000 would fall into the 22% tax bracket but only on the portion of their income that exceeds $48,475. Their income from $11,925 up to $48,475 would be taxed at a rate of 12%. Income below $11,925 is taxed at a 10% rate. These income ranges apply to the 2025 tax year.
How Often Do the Tax Brackets Change?
Tax brackets are set by Congress and enforced by the Internal Revenue Service (IRS). Changes are typically made based on legislation like the Tax Cuts and Jobs Act (TCJA) of 2017. The TCJA kept seven tax brackets but it increased the income ranges for many of them so some individuals could earn more before moving into a higher bracket. The income ranges are also adjusted annually to keep pace with inflation.
What Is the Purpose of a Progressive Tax?
Progressive taxes exist so the burden of paying for government services, oversight, and infrastructure doesn’t fall disproportionately on those earning lesser incomes. Those who earn less are taxed at a lesser rate. Those who earn more are taxed at a higher rate. This concept is known as ability-to-pay taxation. The top earners are taxed more and on larger sums of money so a progressive tax increases the amount of tax revenue coming in.
The Bottom Line
A progressive tax progresses to higher tax rates as taxable income increases. Individuals with lower incomes are taxed at lower rates than those with higher incomes.
The U.S. progressive income tax involves seven tax brackets, each with its own rate. These tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37% in 2025. The brackets didn’t change from 2024 to 2025 but the ranges of income covered by the brackets increased to reflect inflation.