A progressive tax system is designed such that tax rates incrementally rise in tandem with increasing levels of an individual’s income or wealth.
Key Features:
- Lower income brackets face lower tax burdens that gradually scale upward across higher earnings tiers.
- Top tax rates may exceed 50% for ultra-high incomes to mobilize more revenue from those with greatest capacity to pay.
Example:
A progressive personal income tax code applying rates from 5-45% based on annual filers’ pay helped finance pandemic relief through a more equitable distribution of contributions.
Objectives:
While generating essential state revenues, progressive frameworks foster notions of shared sacrifice and ensure the tax code does not unduly curb social mobility – goals especially critical during fragile economic periods.