Final answer:
A progressive tax system imposes higher tax rates on higher income brackets. The U.S. has a highly progressive tax system according to the OECD, which aims to equitably distribute tax burdens and potentially reduce income inequality.
Step-by-step explanation:
A progressive tax system is one where the rate of taxation increases as an individual's income increases. This means that those who earn more money pay a higher percentage of their income in taxes. For example, under a progressive tax structure, incomes between $50,000 and $80,000 might be taxed at a 20 percent rate, while incomes between $300,000 and $1,000,000 could be taxed at a 35 percent rate. This design is intended to distribute the tax burden more equitably, based on the taxpayer's ability to pay.
According to the Organization for Economic Cooperation and Development (OECD), the United States has been recognized for having one of the most progressive tax systems among the OECD nations. This means that in comparison with other countries in the OECD, the U.S. tax system is structured to impose a higher tax rate on high earners relative to low earners. The implications of having a progressive tax system include a more equitable income distribution and the potential for reducing income inequality. However, government practices may not always align with the progressivity of the tax system in terms of the public services and social benefits it provides back to society.