If you pay $2,000 in taxes on an income of $20,000 and $3,500 on an income of $30,000, what is the nature of this taxation?

The nature of the taxation in this scenario is progressive. In a progressive tax system, individuals with higher incomes pay a larger percentage of their income in taxes compared to those with lower incomes.

In the given example, when earning $20,000 and paying $2,000 in taxes, that translates to a tax rate of 10% ($2,000 divided by $20,000). However, when earning $30,000 and paying $3,500 in taxes, the tax rate is approximately 11.67% ($3,500 divided by $30,000). The increase in the effective tax rate as income rises is a hallmark of progressive taxation.

This structure is designed to impose a greater tax burden on those who can afford to pay more, reflecting the idea that as income increases, the ability to bear taxes also increases. This contrasts with proportional taxation, where the tax rate remains the same regardless of income. Regressive taxation, on the other hand, imposes a higher burden on lower-income individuals, while a flat tax applies a single tax rate to all individuals, regardless of income level. Therefore, having a higher effective tax rate at a higher income confirms that the system described is indeed progressive.