What is a progressive tax?
If you’re trying to learn more about taxes, there’s plenty of information out there. But before you dig into the details about rates and returns, it might be worth getting familiar with broader ideas that have an everyday impact on your finances.
Tax systems and classifications, such as progressive taxes and regressive taxes, are good places to start. Learn more about what they are and where you might encounter them in everyday life.
Key takeaways
- Progressive tax systems typically tax high-income earners at a larger percentage than low earners.
- Federal income taxes are an example of progressive taxes. They use tax brackets to determine the tax rate, or percentage, a person pays.
- Regressive taxes use the same tax rate for all earners, which results in lower earners paying a higher percentage of their income.
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Flat taxes, like sales and excise taxes, are forms of regressive tax.
Progressive tax definition and how it works
Under a progressive tax system, the tax rate people pay increases as their income increases. This means that people with higher incomes get taxed at a higher rate than those with lower incomes do.
The U.S. federal income tax is an example of a progressive tax system. Under it, taxpayers are grouped into tax brackets according to their taxable income. Typically, the more income a person earns, the higher the tax bracket they may fall into.
Do people pay the same federal tax rate on all income?
The short answer is no. With a progressive income tax, the tax rate applies only to the portion of a person’s income that falls within that range of the tax bracket.
For example, a single filer who made $40,000 in 2022 would pay a tax rate of 10% on the first $10,275 of their income and 12% on the remainder. This is because the tax bracket for 2022 for a single filer earning $0 to $10,275 is 10%, and then it increases to 12% for single filers earning $10,276 to $41,775.
There are seven tax brackets for 2022 federal income taxes, which are filed in 2023:
| Tax bracket for single filers | Tax bracket for married couples filing jointly | Income tax rate |
| $0–$10,275 | $0–$20,550 | 10% |
| $10,276–$41,775 | $20,551–$83,550 | 12% |
| $41,776–$89,075 | $83,551–$178,150 | 22% |
| $89,076–$170,050 | $178,151–$340,100 | 24% |
| $170,051–$215,950 | $340,101–$431,900 | 32% |
| $215,951–$539,900 | $431,901–$647,850 | 35% |
| $539,901 and over | $647,851 and over | 37% |
Progressive taxes vs. regressive taxes
Progressive and regressive taxes differ in how they impact different groups of earners.
A tax is considered regressive when its tax rate is applied to all people, regardless of earnings or other considerations. Because the percentage is universal, the tax rate ends up taking a bigger portion of income from low-income earners.
Regressive vs. flat tax
A flat tax, sometimes called a proportional tax, is an example of a regressive tax.
For example, let’s say two people with different incomes buy a $100 jacket and pay 5% sales tax. If one person makes $100,000 a year and the other makes $40,000, the tax burden is higher on the person with the lower income.
Social Security and Medicare payroll taxes are other examples of flat taxes.
Progressive tax in a nutshell
Under a progressive tax system, higher-income earners typically pay a higher percentage than those with lower incomes do. On the other hand, regressive taxes and flat taxes typically have a tax rate that applies universally.
Learning how progressive taxes work can help you understand how your income is being taxed and help you estimate your tax liability. Want more tax guidance? Learn how to file taxes.
