Glossary

Progressive tax

A tax whose rate rises as the taxpayer's income or wealth rises, so higher earners pay a larger share.

Also called: graduated tax, progressive taxation, ability to pay

A progressive tax takes a larger percentage of income from high earners than from low earners. The federal income tax is the standard example: it uses brackets with increasing marginal rates, so that higher portions of income are taxed at higher rates.

The principle behind it is often described as "ability to pay": those with more resources can bear a heavier burden. Adam Smith made a version of the argument, and the Sixteenth Amendment (1913) authorized the federal income tax. Other progressive features include the estate tax and credits that phase out as income rises. Some taxes are the reverse, such as regressive taxes.

Supporters argue that progressivity reduces inequality, reflects declining marginal value of a dollar and funds public services fairly. Opponents argue that it penalizes success, reduces incentives for work and investment at the top and is complex, and many favor a flat tax. Economists generally agree that the U.S. federal tax system as a whole is progressive, while disagreeing about the right degree and the effects on growth. The share of income taxes paid by the top earners is large, which each side uses to support its case. See marginal tax rate.

Last reviewed November 8, 2026

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Related terms

Regressive tax A tax that takes a larger share of income from low earners than from high earners. Flat tax An income tax with one rate for everyone, usually paired with a large exemption and few deductions. Marginal tax rate The tax rate that applies to the next dollar of income, as distinct from the average rate on all income. Wealth tax A recurring tax on the total net worth of individuals above a threshold, rather than on their annual income. Effective tax rate The share of total income a person or company actually pays in taxes after deductions and credits.