Understanding the progressive income tax in the U.S. means looking beyond people's overall rates. Both the composition of income and how each income source is taxed shape the distribution of federal tax burdens. Recent research finds that: ➡️ The federal income tax system is progressive, with higher earners paying larger shares of their income in taxes. But the degree of progressivity depends on whether income comes from wages, investments or other sources. ➡️ Wage income is taxed more progressively, ranging from negative effective tax rates for the lowest earners (because of refundable credits) to over 22% for the highest earners. This drives most of the system's overall progressivity. ➡️ Investment income and other nonwage sources show much flatter tax rates across income groups. Since wealthy households receive more income from these sources, the overall tax system becomes less progressive at the top than wage taxation alone would suggest. Read the full analysis: