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This paper constructs a dynamic economic growth model in an integrated Walrasian and neoclassical equilibrium theory. This study is concerned with dynamic interactions between progressive nonlinear taxation and wealth and income distributions between heterogeneous households. The economy is composed of one industrial sector and public sector with labor and capital as input factors. The government taxes households and the tax income is entirely spent on supply public services. The population is classified into any number of households and households use disposable incomes for consumption and saving. The machine of economic growth is wealth accumulation. The model builds dynamic interdependence between economic growth, economic structural change, capital/wealth accumulation, progressive nonlinear income taxation, and public services. We simulate the model to demonstrate dynamic properties of the economic system. We show the existence of equilibrium and follow the motion of the dynamic system. We conduct comparative dynamic analysis in different parameters.