Title: Types Of Taxes | Intelligent Economist
Headings: Types of Taxes
Types of Taxes
Prateek Agarwal
Direct and Indirect Taxes
Types of Taxes
1. Progressive Tax System
2. Proportional Tax System
3. Regressive Tax System
Progressive vs. Proportional vs. Regressive Taxes
Prateek Agarwal
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Content: 2. Proportional Tax System
I n a proportional tax rate system, which is also known as a flat tax, everyone pays the same proportion of their income as tax, no matter how high or low their income is. The tax rate does not change with an increase or decrease in income, although many critics note that proportional taxes unfairly burden those with fewer resources. In this system, the average tax rate is equal to the marginal tax rate. It exists in Latvia and Russia and is considered by some to be more “fair” and easier to manage for everyone, since no one is exempt. Some states in the U.S., such as Colorado, Utah, and Michigan, impose a proportional income tax for individuals. Another example of proportional taxation is the U.S. sales tax, as all consumers pay the same fixed tax rate as a percentage of the cost of the goods they’re purchasing. 3. Regressive Tax System
A regressive tax is a type of tax that results in a decrease in the tax rate as the amount subject to taxation increases. In a regressive tax rate system, individuals with lower incomes pay a higher proportion of their income as tax than individuals with higher incomes.