A progressive tax system is one in which the average tax rate rises with income, so higher-income individuals pay a greater proportion of their earnings in tax than those with lower incomes.
In essence, as income increases, both the absolute tax paid and the applicable marginal tax rate rise, typically through income brackets with escalating rates.
Example (hypothetical UK-style income tax bands for Alex earning £50,000 annually):
| Income Range (annual) | Tax Rate | Example Calculation |
|---|---|---|
| £0 – £12,000 | 0% | £0 tax on first £12,000 |
| £12,001 – £40,000 | 20% | £5,600 tax on next £28,000 |
| Over £40,000 | 30% | £3,000 tax on remaining £10,000 |
| Total Tax | £8,600 (17.2% average rate) | |