Title: Tax Structures: Types & Concept - Video & Lesson Transcript | Study.com
Headings: Tax Structures: Types & Concept
Tax Structures: Types & Concept
Lesson Transcript
Types of Tax Structures
Regressive Tax Structure
Progressive Tax Structure
Proportional Tax Structure
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Content: The poorest member of society pays the same sales tax on a television as the richest. A proportional tax system theoretically should create an equal tax burden for all taxpayers, but some argue it doesn't. Some argue that a proportional tax is often regressive. Let's use the sales tax as an example. A sales tax is a tax on consumption - it is only leveled when we buy goods and services. Since low-income taxpayers spend a much higher percentage of their income on consumption than high-income taxpayers, who have more money to save and invest after satisfying their needs and wants, lower-income people are burdened more by the sales tax than higher income people whose income is subject to much less sales taxation. Lesson Summary
A government can use three different tax structures that will affect taxpayers differently. A regressive tax structure shifts the burden of taxation to low-income taxpayers because they pay a disproportionately higher rate of taxes. A progressive tax structure shifts the burden of taxation to high-income taxpayers because they pay a disproportionately higher rate of taxes. A proportional tax structure theoretically does not shift the tax burden onto any one group because the same tax rate applies to all taxpayers.