A progressive income tax system is a tax that is applied to the incomes of members of an economy at different rates, with people who make more money paying taxes at a higher rate. For example, under such as system, a person who makes $50,000 might pay 20 percent in income taxes, while a person who makes $100,000 may pay 40 percent. This system carries both advantages and some drawbacks.
Advantage: Reduces Income Inequality
Perhaps the main benefit of a progressive tax system is that it helps reduce income inequality. Income inequality is when one segment of the population controls a much larger share of the economy's wealth than another. According to economist Roger A. Arnold, excessive inequality can lead to political instability. By shifting the wealth of the society, the progressive tax system helps reduce inequality.
Advantage: Fairer (In Some Ways)
The progressive tax system is fairer than a tax system in which everyone is required to pay taxes at the same rate because it requires those who are able to earn more to give more back to their government, while those who are not able to earn as much are not required to pay as much back. In this way, those who get the most out of a system are the ones who most support it.
Disadvantage: Punishes Hard Work
A progressive tax system can be interpreted as punishing hard work by requiring those who make more money -- presumably, through hard work and a judicious application of their skills -- to give back a higher percentage of what they make. This effectively punishes hard work and disincentives people from earning more money, as they will simply have to give more of it back.
Disadvantage: Unfair (In Other Ways)
A progressive tax can also be seen as unfair in that people who work in the same society are being required to pay different percentages of their salary to the government. In a country such as the United States, which prides itself on equal treatment under the law, this may smack of a clear prejudice against the most successful part of society.