Final answer:
In a proportional tax system, taxes owed increase as income increases because the same percentage is applied to all income levels. Progressive tax systems, however, not only increase the taxes owed with higher income but also the tax rate applied to the next dollar earned. 'Bracket creep' from inflation is now controlled by indexing tax brackets to rise with inflation.
Step-by-step explanation:
Under a proportional tax rate structure, as the taxpayer's income base increases, the amount of taxes they owe also increases. This is because a proportional or flat tax rate applies the same percentage of tax to all levels of income, so as a taxpayer earns more, they pay more in absolute terms, even though the rate of tax they pay does not change. Conversely, with progressive tax rates, as one's income increases, not only does the amount of taxes paid increase, but also the percentage of tax paid on each additional dollar earned (marginal tax rate) increases.
The concept of 'bracket creep' refers to the phenomenon where increases in nominal wages due to inflation result in taxpayers moving into higher tax brackets, owing a higher portion of their income in taxes. This was an issue until the 1980s when tax bracket thresholds began to be indexed to inflation, preventing taxpayers from moving into higher brackets merely due to inflationary wage increases.