What defines a Progressive Tax System?

A Progressive Tax System is characterized by the principle that individuals with a higher ability to pay contribute a larger percentage of their income in taxes compared to those with lower incomes. This means that as a person’s income increases, the tax rate they are subjected to also rises, making the tax burden more equitable. This structure is intended to alleviate the financial stress on lower-income earners while ensuring that wealthier individuals contribute a fair share to funding public goods and services.

The progressive nature of this system helps address income inequality, as it takes into account the taxpayer's economic capacity. For example, a small income may be taxed at a lower rate which allows individuals to manage their living expenses, while higher earners might be taxed at a higher rate since they can afford to contribute more without compromising their standard of living.

This is distinctly different from a flat tax system where everyone pays the same rate regardless of income level or from regressive systems where lower incomes are taxed at a higher rate in relation to their income. Consequently, understanding the progressive taxation model is essential for grasping broader socio-economic policies and their implications on wealth distribution in society.