What is proportional tax and what is regressive tax and an example of each?

A proportional tax is a tax that takes income from all income groups so that the income tax rate is fixed. The amount that is taxed is in proportion to what is taxable. For example, $20,000 at a 10% tax rate would be $2,000, and $10,000 at the same rate would be $1,000. So therefore the overall taxed amount is different, but the rate stays the same. As for regressive tax, that is a tax that takes higher percentage of income from a low income group, rather than taxing the wealthy more. When the amount being taxed is higher then the tax rate decreases, and vice versa. Examples of regressive taxes are property tax and sales tax.

Related Tax Questions

Comments