What type of tax system charges higher percentages as income increases?

A progressive tax system is designed to impose higher tax rates on individuals or entities with higher incomes. This means that as a person's income increases, the percentage of their income that they pay in taxes also goes up. The rationale behind progressive taxation is to promote equity in the tax system; those who can afford to contribute more to the funding of public services and infrastructure do so, while lower-income earners face a lower tax burden. This structure is viewed as a way to reduce income inequality and ensure that essential government programs are adequately funded.

In contrast, regressive taxation applies a higher rate to lower incomes, placing a heavier burden on those who earn less. Flat taxation imposes the same percentage rate regardless of income level, while proportional taxation maintains the same ratio of tax to income, meaning everyone pays the same percentage regardless of their income. These systems do not emphasize the principle of taxing based on the ability to pay as effectively as progressive taxation does, making progressive tax systems a key component of modern fiscal policy aimed at achieving social equity.