Progressive tax
A tax system in which marginal rates rise as income increases — used for national income tax in every country on this site except some US states.
A progressive tax applies higher marginal rates to higher slices of income. Earnings up to a threshold are taxed at a low rate; the next slice is taxed at a higher rate; and so on. The average effective rate paid by an earner therefore depends on where their total income falls across the brackets.
All five jurisdictions on this site use progressive income tax at the national level. UK: 0% / 20% / 40% / 45%. US federal: 10% / 12% / 22% / 24% / 32% / 35% / 37%. Germany: a formula-based curve from 14% to 45% with surcharges. France: 0% / 11% / 30% / 41% / 45%. Spain: 19% / 24% / 30% / 37% / 45% / 47% (state portion).
Progressive systems are designed to extract a higher share of national tax revenue from higher earners while leaving more disposable income with lower earners — the redistributive principle. Flat-tax systems (see /glossary/flat-tax) apply one rate regardless of income and are mostly seen at the US state level. The combined system is almost always still progressive even when a state or sub-national layer is flat.
Calculator pages that use this term
See also
- Marginal tax rate — The percentage paid in tax on the next unit of income earned — distinct from the average effective rate.
- Effective tax rate — Total deductions divided by gross pay — the single percentage that summarises the overall tax bite.
- Flat tax — A tax system that applies a single rate to all income — used by 11 US states and a handful of European countries.