A tax structure in which the tax rate increases as the amount of taxable income increases. “Progressive” due to the nature of the tax rate progressing from low to high, the net effect is that higher-earning individuals are taxed more heavily than lower-earning ones. In this structure, a taxpayer’s average tax rate is less than the person’s marginal tax rate.
For example, say Sarah reports $50,000 of taxable income on her tax return. Assuming she is filing as an individual, Sarah’s marginal federal income tax bracket will be 22%. Due to federal income tax being progressive in nature, however, Sarah will calculate her tax liability as so:
| Tax Rate | Taxable Income Bracket | Tax Owed |
| 10% | $0 to $9,525 | 10% of taxable income |
| 12% | $9,526 to $38,700 | $952.50 plus 12% of the amount over $9,525 |
| 22% | $38,701 to $82,500 | $4,453.50 plus 22% of the amount over $38,700 |
Once adding up the tax liability from each bracket, Sarah’s federal income tax liability will be $6,939.50. This equates to a marginal tax rate of 13.88%.
