What Taxes Are Progressive? A Guide on the Progressive Tax System

What taxes are progressive? Well, all of them! At least at the federal level for income tax. The US federal government utilizes a progressive tax system, meaning that tax rates increase (or progress, hence the name) as your taxable income increases. This is so lower-income earners don’t get choked by too-high taxes, while higher earners pay in proportion to their earnings.

What Is a Progressive Tax System?

If the U.S. has a progressive tax system, then what taxes are progressive? Well, it’s not really a question of which taxes are progressive, but what progressive taxes are. Progressive taxation is designed to ensure that individuals with higher incomes contribute a larger share of their earnings to government revenue.

This system contrasts with regressive and flat tax structures, which apply uniform tax rates regardless of income level. This is a hotly contested topic, and no matter who you ask about it, they’re sure to get passionate about it.

Can better understanding the progressive tax system help taxpayers navigate their financial obligations and take advantage of potential tax-saving strategies? We can only hope, so let’s dive in!

What is Progressive Taxation?

Simply put, a progressive tax system imposes higher tax rates on individuals with higher earnings, and lower taxes on those who earn less. Pretty simple stuff, right?

The logic behind this system is rooted in the principle of ability to pay—those who earn more can obviously afford to contribute a greater share of their income to fund government services.

Let’s look at an example: A person earning $30,000 per year may pay a lower tax rate compared to someone earning $500,000 annually. Doing it like this ensures that lower-income individuals retain more of their earnings to cover essential living expenses.

Federal Income Tax: A Prime Example of Progressive Taxation

The progressive tax in the United States that everyone should be familiar with is none other than the federal income tax. The IRS uses a bracketed tax system, meaning different portions of income are taxed at different rates.

As income increases, so does the percentage taxed on additional income. Here’s a simplified example to better illustrate it:

• $0 – $11,000: 10%
• $11,001 – $44,725: 12%
• $44,726 – $95,375: 22%
• $95,376 – $182,100: 24%
• $182,101 – $231,250: 32%
• $231,251 – $578,125: 35%
• Above $578,125: 37%

A tiered system like this ensures that those with higher incomes pay progressively higher rates while still benefiting from lower tax brackets on their initial earnings.

Advantages & Disadvantages of Progressive Taxes

Few hot button issues in America are as sensible as the tax question itself. Some argue about how we should be taxed, others about how much we should be tax, and others even argue that we shouldn’t even be taxed at all.

Another big debate is the progressive tax system itself. A progressive tax system is designed to adjust tax rates based on income levels, with lower earners paying a smaller percentage and higher earners paying more.

Is this approach actually beneficial to the people that it tries to protect, or does it create more problems than it solves? Let’s break down the pros and cons in simple terms.

Advantages of a Progressive Tax System

One of the biggest perks of a progressive tax system is that it eases the tax burden on those who earn less. For example, as of 2025, if you’re a single filer making $11,925 or less per year, you’d only pay 10% in federal income tax. But if you’re bringing in more than $626,350 annually, every dollar earned beyond that amount gets taxed at 37%.

This setup helps low-income earners keep more of their money, which they’re likely to spend on essentials like groceries, rent, and transportation—ultimately boosting the economy and keeping the majority of the population above the poverty line (which is basic for a healthy, thriving economy).

Another undeniable benefit is that a progressive tax system simply brings in more revenue compared to flat or regressive taxes. The idea is that those who have the most financial resources contribute more, helping to fund public services like road repairs, law enforcement, and emergency services that benefit everyone.

But, the reality is that low- to middle-income people contribute the majority of what the government gets on income taxes.

Why Some People Disagree with a Progressive Tax

Not everyone is a fan of progressive taxation. Critics argue that higher tax rates on top earners can discourage hard work and success. Some also see it as a way of redistributing wealth, which they believe unfairly targets both the wealthy and the middle class.

Opponents of progressive taxes often prefer lower taxes overall, believing that smaller government and fewer public services are a better approach to economic growth.

Estate & Gift Taxes and Progressive Taxation

Estate taxes are another form of progressive taxation. They apply to the value of an estate left behind when someone passes away. The higher the estate’s value, the higher the percentage taxed. For 2024, estates valued above $13.61 million are subject to federal estate taxes, with rates ranging from 18% to 40%.

In a similar manner, gift taxes apply when an individual gives away assets with a value exceeding the annual exclusion set by the IRS ($19,000 per recipient in 2025). With these taxes in place, the government ensures that wealth transfers above set limits are subject to increasing tax rates.

Are State and Local Taxes Progressive Too?

Not all states have progressive tax systems, but some mirror the federal model. States like California, New York, and New Jersey have multiple tax brackets, ensuring higher earners pay more in state income tax.

Other states, such as Texas and Florida, do not have state income taxes, relying instead on other revenue sources like sales taxes.

How Tax Deductions and Credits Work in a Progressive System

While the U.S. tax system is designed to be progressive, tax deductions and credits can significantly impact how much individuals ultimately pay. Some key factors include:

• Standard and Itemized Deductions: Lower taxable income, reducing overall liability.
• Earned Income Tax Credit (EITC): Benefits lower-income taxpayers.
• Capital Gains Tax Considerations: Long-term investment income is taxed at a lower rate than ordinary income.

These elements create opportunities for taxpayers to lower their effective tax rate despite being in higher brackets.

The Final Word on the Progressive Tax System…

So, what taxes are progressive? The most notable examples include the federal income tax, estate tax, and certain state income taxes. These taxes follow a structure that requires higher earners to pay a larger share of their income.

We’re not looking to change anyone’s mind on this topic, that would be terribly naive. We just hope that, through a better understanding of how progressive taxation works, we can help taxpayers like you plan their finances more effectively, and to maximize every tax-saving opportunity that comes your way. At the very least, we want people to stay informed about their tax responsibilities.

What Taxes Are Progressive?: FAQ

1. Why does the U.S. use a progressive tax system?
It is a way to “even the playground” for all Americans, so they are able to contribute without being charged more than they can give. The progressive tax system is based on the idea that higher-income taxpayers can afford to contribute a larger percentage of their earnings, helping to fund government programs and social services.

2. Are Social Security and Medicare taxes progressive?
No, Social Security taxes are what is called “regressive” because they are only applied to wages up to a certain limit ($176,100 in 2025 from a rate of 6.2%), meaning higher earners pay a smaller percentage of their overall income.

3. Do all states have a progressive income tax?
No, some states have a flat tax where everyone pays the same rate, while others have progressive tax brackets similar to the federal system.

4. How do tax credits impact progressivity?
Tax credits, like the Earned Income Tax Credit, help lower-income individuals by reducing their tax liability, making the tax system more progressive.

5. Are corporate taxes progressive?
Corporate income taxes are generally flat, but businesses with higher profits may pay more in total taxes, making the system somewhat progressive in effect.

6. Can deductions reduce the progressivity of the tax system?
Yes, high-income earners often use deductions and credits to lower their taxable income, sometimes reducing the overall impact of progressive taxation.

---