Progressive taxation * A tax rate is progressive if it increases as the tax base increases. Tax rates increase with increases in taxable income. * Examples:
Federal income tax
Federal estate
Gift taxes

Currently, there are six rates ranging from 10 to 35 percent (as per our study material Chapter 1)

Annual median income (defining the upper and lower one-half of citizens) is about $33,000. Income of more than $340,000 puts a taxpayer in the top 1 percent of filers, and effective Federal taxes for the top 10 percent of earners have increased faster than their incomes. The following table shows the share of Federal taxes paid by various income categories.

Income Category Share of Total Income (%) Share of Federal Income Taxes Paid (%)
Top 1% 17 37
Top 5% 32 59
Bottom 50% 13 02

If you see the table, we can see that Top 5% of the income category pays almost 59% of share of federal Income taxes. So the poor (i.e the 50%) contributes just 2% of the Taxes. I will mention this later in my discussion.
(The above information has been gathered from our study material Chapter 1.)

Advantages of progressive taxation

* More Revenue: By using a progressive tax system, the gap between the rich and the poor will decrease slightly. Since the tax rate goes up for those who make more money, more money will go to the state. As I mentioned in earlier, the major portion of the taxes come from the Super Rich. Hence more their income, more is the revenue for the country. This increases the standards of living for all as a lot of the money that goes into making roads and highways and for the betterment of the country, comes from the taxpayers. * Income Equality: If the tax system was a flat tax system, economically struggling households must sacrifice a larger portion of their purchasing power to tax obligations than higher