Progressive Tax

Progressive Tax Definition

A progressive tax is a popular form of taxation which levies taxes according to the individual’s household income. In the sense it levies higher taxes to wealthier individuals and considerably lower tax to low income individual. Most believe that this is the best taxation since it lessens the tax burden to low income families. The lower class individuals are shielded from higher tax burdens.

Progressive Tax Tax Base

The tax base for a progressive tax system is a person’s income. It increases for high income earners and decrease for a low income earners. There are some policies wherein an individual can be exempted from paying higher taxes as his income begins to raise; like child loans, housing loans, and tax free investments.

Progressive Tax Advantages

The biggest advantage seen in a progressive tax system is higher income individuals and wealthier individuals pay more of a tax burden. This softens the poorer classes and also those individuals who suffer a decrease in income, from paying high taxes for their less household income. Proponents also believe that high income individuals should pay more for the services provided by the government as this also supports the government to utilize the money for other activities to be implemented by the government; because the wealthy have the ability to pay for others from their wealth.

Progressive Tax Disadvantages

Opponents of progressive tax system believe that it is an invasion of individual rights because they are punished for their success. Because, these taxes are redistributed to the poorer sections by government aided programs some see this  a kind of socialism. On the other hand it also increases off-shore banking because high income earners try to hide their wealth by depositing their money in foreign banks.

Examples of Progressive Taxation:

The general example of progressive taxation is income tax. As an individual’s salary increases the tax which he/she is liable to the government also increases.

Flat Tax Definition:

flat taxation refers to that type of taxation system in which tax is levied at a constant rate. Usually it refers to household income being taxed at a marginal rate. Flat taxes offer simplicity in tax code. The main theme is that it exempts a household income that is below a statutory level when it comes to the point of size or type of that household.

Contrary to the flat tax rate progressive taxation offers a tax system wherein the tax rate is decided by the income of the individual. Every person in this type of tax system is required to pay some amount as tax regardless of his income unlike the flat tax.

Marginal Tax Rate

This is defined as an additional amount of money paid as tax to the government for a dollar increase in income. In other words, if income increases tax rates also increase. These marginal tax rates are also known as ordinary income tax rates as these tax rates applicable to most kinds of income.

Marginal tax brackets according to the U.S. financial year 2010:
There are 6 marginal tax brackets

  • 10%
  • 15%
  • 20%
  • 28%
  • 33%
  • 35%

Federal Tax

These are the taxes that an individual pays to the federal government. Federal tax tables for 2009 are shown below. These federal tax tables are divided into 4 categories based on the filing status: single, married filing jointly, married filing separately, head of household.

Filing Status Single:

Income Rate
Between $0 to $ 8350 10%
Between $ 8350 to $33,950 plus $ 835.50 15%
Between $ 33,950 to  $82,250 plus  $4675 25%
Between $82,250 to $171,550 plus $ 16,750 28%
Between $ 171,550 to $ 375,950 plus $ 41,754 33%
Income over $ 372,950 plus $108,216 35%

Filing Status Married Filing Jointly:



Between $0 to $ 16,700 10%
Between $ 16,700 to $67,900 plus $1670 15%
Between $16,700 to $137,050 plus $9350 25%
Between $137,050 to  $208,850 plus $26,637.50 28%
Between $208,850 to $372,950 plus $46,741.50 33%
Over $372,950 plus $ 100,894.50 35%

Married Filing Separately:

Income Rates
Between $0 to $8350 10%
Between $ 8350 to $ 33,950 plus $ 835 15%
Between $33,950 to $68,525 plus $4675 25%
Between $68,525 to $104,425 plus $13,318.75 28%
Between $104,425 to $186,475 plus $23,370.75 33%
Above $186.475 plus $50,447.25 35%

Filing Status Head of Household:

Income Rates
Between $0 to $11,950 10%
Between $11,950 to $45,500 plus $1195 15%
Between $45,500 to $117,450 plus $6227.50 25%
Between $117,450 to $190,200 plus $24,215 28%
Between $190,200 to $372,950 plus $44,585 33%
Above $372,950 plus $104,892 35%