Progressive tax rates are applied to different portions of the taxable income, which is an attempt to make the income tax system more equitable.
A progressive tax is where the tax rate increases as the taxable amount increases, which means higher income earners pay a larger percentage of their income in taxes than lower income earners.
This is in contrast to a proportional tax, where everyone pays the same percentage of income regardless of how much they earn, and a regressive tax system where lower income earners pay a higher proportion of their income in taxes relative to higher income earners.
From an economic perspective, it's challenging to incorporate all the details of the tax system into overarching fiscal theory. Economists often focus on simplified models, such as the Keynesian cross diagram, and consider taxes as a proportionate share of GDP. However, the understanding of marginal and average tax rates, and how they impact consumption behavior and economic activity, is crucial.
Moreover, taxes are expected to meet principles of equity, simplicity, efficiency, the benefit principle of taxation, and the ability to pay principle. These principles help ensure that the tax system is fair and understandable to taxpayers, and that it aligns with societal values of fairness and responsibility.