Salary FYI

Progressive Tax

Tax

A tax system where the tax rate increases as the taxable income increases, so higher earners pay a larger percentage of their income in tax.

## Progressive Tax

A progressive tax system applies higher marginal tax rates to higher income levels. This is the most common personal income tax structure worldwide.

### How It Works

Income is divided into brackets, each taxed at its own rate. Only the income within each bracket is taxed at that bracket's rate — not the entire income.

### Example (US 2025)

| Bracket | Rate |
|---------|------|
| $0–$11,925 | 10% |
| $11,926–$48,475 | 12% |
| $48,476–$103,350 | 22% |
| $103,351–$197,300 | 24% |
| $197,301–$250,525 | 32% |
| $250,526–$626,350 | 35% |
| $626,351+ | 37% |

An individual earning $120,000 does not pay 24% on the full amount. Their effective rate is approximately 17.5%.

### Arguments For and Against

**For**: Ability-to-pay principle, reduces inequality, stable revenue.
**Against**: Can discourage earning, complex to administer, may encourage avoidance.