PROGRESSIVE TAX

A tax with a rate that increases as the amount to be taxed increases. For example, a taxing authority might levy a tax of 10% on the first $10,000 of income and increase the rate by 5% per each $10,000 increment up to a maximum of 50% on all income over $80,000. A progressive tax often uses high rates on relatively large incomes and tends to encourage tax shelters. The federal income tax and the unified gift-estate tax are progressive taxes.