Certified Government Financial Manager (CGFM) 2025 – 400 Free Practice Questions to Pass the Exam

U.S. Federal Income Taxes are generally characterized as progressive because they are structured in a way that imposes a higher tax rate on higher income levels compared to lower income levels. This means that as a taxpayer's income increases, they not only pay more taxes but also pay a greater percentage of their income in taxes. The system is designed to redistribute income more equitably across different income brackets, helping to reduce income inequality by ensuring that those with greater financial capabilities contribute a fair share towards federal revenue.

The progressive nature of the income tax system aligns with the principle of the ability to pay, whereby individuals are taxed based on their financial capacity. Each tax bracket corresponds to a specific income range, with increasing rates for higher brackets, which means that lower-income individuals benefit from lower tax rates, while higher earners face higher tax burdens. This system is contrasted with regressive taxes, where lower-income individuals pay a higher percentage of their income compared to higher earners, and proportional or flat taxes, which charge the same rate regardless of income level. Therefore, the correct characterization of U.S. federal income taxes reflects the goal of achieving a more equitable tax burden in accordance with individual income levels.