Progressive Tax

A progressive tax charges a higher rate as income rises, in contrast to a flat tax that applies one rate to everyone. Korea's income tax runs through eight brackets from 6% up to 45%.

Here is the most common misunderstanding: moving into a higher bracket does not apply that rate to your whole income. Progressive tax is charged in slices, so the higher rate applies only to the portion of income inside that bracket. Earn $1,000 above the top of the 6% band and only that $1,000 is taxed at the next rate. Everything below is unchanged.

So the idea that a raise pushing you into a new bracket can shrink your take-home pay is simply false. Crossing a bracket means a larger share of the additional income is taxed, but the money you keep always increases. This structure is also why your effective tax rate ends up far below the top marginal rate.

The rationale is that the same $100 weighs more heavily on someone earning little. The system spreads the burden according to capacity and narrows income gaps. By contrast, a value-added tax charges everyone the same rate when they spend, which lands relatively harder on lower incomes and is therefore called regressive.