Strictly speaking, the United States government taxes individual income progressively. As a person earns more and progresses, or graduates, through the tax brackets, their rate increases. But it's not a monumental change when you jump from one tax bracket to another, as only a portion of your income is taxed at the highest level.
How progressive taxes work
Tax brackets
Think of a progressive tax system as a set of stairs. A portion of your income is left at each step and taxed at the flat rate tied to that tax bracket. If your income is greater than the threshold for one stair, the excess will progress to the next stair and be taxed at the next highest rate, which currently tops out at 37%.
Put another way, your marginal tax bracket — or the highest tax rate you fall into — applies only to the amount of your taxable income above the minimum threshold. For income below that limit, you pay the same amount of federal income taxes as everyone else, even if they earn less overall.
For instance, if your taxable income (gross income minus any deductions) is $50,000 a year as a single filer, that puts you in the 22% federal tax bracket in 2024. But while 22% of $50,000 is $11,000, you're not paying $11,000 in taxes.
How much you ultimately pay in taxes depends on several factors, including whether you're single or married, what tax deductions are available to you, and of course, how much you earn.
Some states also tax income progressively, while others have a flat tax rate or don't tax income at all.
Below are the federal tax brackets for 2024:
| Rate | Single | Married filing jointly | Married filing separately | Head of household |
| 10% | $0 to $11,600 | $0 to $23,200 | $0 to $11,600 | $0 to $16,550 |
| 12% | $11,601 to $47,150 | $23,201 to $94,300 | $11,601 to $47,150 | $14,651 to $55,900 |
| 22% | $47,151 to $100,525 | $94,301 to $201,050 | $47,151 to $100,525 | $55,901 to $89,050 |
| 24% | $100,526 to $191,950 | $201,151 to $383,900 | $100,526 to $191,950 | $89,051 to $170,050 |
| 32% | $191,951 to $243,725 | $383,901 to $487,450 | $191,951 to $243,725 | $171,051 to $215,950 |
| 35% | $243,726 to $609,350 | $487,451 to $731,200 | $243,726 to $365,600 | $215,951 to $539,900 |
| 37% | $609,351 and over | $731,201 and over | $365,601 and over | $539,901 and over |
Marginal tax rate vs. effective tax rate
You might hear someone say they are in the 24% tax bracket because their income falls within that range. That's their marginal tax bracket. It's called marginal because only a portion of income is taxable at that rate.
To get the flat percentage of your income (both earned and unearned) that is actually taxed, you need to find your effective tax rate. You can do that by dividing your tax liability by your gross income.
Examples of progressive taxes
Federal income tax
Income taxes are the federal government's largest single source of revenue.
According to the Urban-Brookings Tax Policy Center, the average effective tax rate for all individuals in 2023 was 10.7%. But among the top 1% of earners, the average person paid a 23.7% tax on their taxable income.
By contrast, the lowest two quintiles of earners had a negative effective income tax rate, on average, thanks to refundable tax credits and the standard deduction coupled with progressive rates.
State income tax
Most states tax income, and some use the same tax brackets and rates as the federal government. About a dozen states have a flat rate, which collects the same percentage of taxable income from every resident, regardless of income level. A flat tax is simpler to administer and easier for taxpayers to understand, and in some cases is seen as more "fair" than a progressive system since wealthier individuals do not shoulder a greater tax burden.
Estate tax
The estate tax only applies to households with exceptional wealth. In 2024, the estate tax exemption amount is $13.61 million for individuals and $27.22 million for married couples. Only amounts above those thresholds are subject to taxation. The rates, like income tax rates, are progressive, beginning at 18% for the first $10,000 over the exemption amount and rising to 40% for $1 million or more.
Benefits of progressive taxes
The tiered structure of a progressive tax system is said to redistribute wealth from higher earners to lower earners since wealthier people pay a greater share of their income.
Taxes collected by the federal government go toward large-scale programs, such as defending the country and providing social safety nets, including Social Security and Medicare. Around 8% of federal tax revenues in fiscal 2023 supported economic security programs that help households experiencing financial hardship.
Drawbacks of progressive taxes
The progressive tax system places a larger burden on high-income individuals. This can lead to two undesirable outcomes for the government in its quest to collect tax revenue.
Firstly, it can disincentivize people from earning more money, since they face the possibility of moving into a higher tax bracket. That could look like turning down a higher-paying job or taking fewer career risks to avoid increasing income. Secondly, it can inspire higher earners to use tax avoidance strategies, or legal loopholes that reduce their tax liability, thereby reducing government revenues.
FAQs about progressive taxes
Is a progressive tax system fair?
A progressive tax system places a higher burden on wealthier individuals, which could be seen as unfair. However, proponents of progressive taxes say it is a meaningful way to redistribute wealth and support the upward mobility of those who have fewer resources. The fairness of progressive taxes ultimately depends on your definition of fair.
How do progressive taxes affect the economy?
Critics of progressive taxes say they slow down the economy by redirecting funds wealthy people might otherwise use to buy goods and services and start businesses to pay taxes.
What are the alternatives to a progressive tax system?
An alternative to a progressive tax system is a flat tax, which charges everyone the same rate regardless of income. It's straightforward, easy to understand, and predictable, and may encourage people to earn more without fearing a larger tax burden.
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