The U.S. tax code provides a clear, real-world example of a progressive tax system. In a progressive tax system, income is taxed at a rate that rises as the income rises into higher brackets. In the United States, according to About.com, there are seven of these income brackets, with each taxed at a different rate.
Under the U.S. system, income is taxed a fixed percentage at each level up to a certain threshold, whereupon any subsequent income is taxed at the higher rate. What this means in practice, as About.com describes, is that a person who earns $1 million in a year will be taxed at each of the seven different tax rates. A single person making $50,000 in taxable income, however, is only taxed at the first three rates as this income is under the threshold for entering the fourth bracket.
The seven income tax rates in the progressive U.S. tax code are: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.5 percent. These rates are set by Congress, and they are distinct from flat taxes, such as Medicare and Social Security withholding taxes, and the regressive sales taxes imposed by some states. Capital gains on investments are also not progressive, as they are taxed at a flat rate, according to About.com.