Types Of Taxes: Direct/Indirect, Progressive/Regressive/Proportional
Economics notes
Types Of Taxes: Direct/Indirect, Progressive/Regressive/Proportional
➡️ Taxation is a key tool used by governments to raise revenue and fund public services. It is also used to redistribute wealth and influence economic behaviour.
➡️ Taxes can be levied on income, profits, capital gains, property, goods and services. They can be progressive, meaning that those with higher incomes pay a higher rate, or regressive, meaning that those with lower incomes pay a higher rate.
➡️ Taxation can be used to encourage or discourage certain activities, such as investment in green technologies or the purchase of luxury goods. It can also be used to promote economic growth and reduce inequality.
What is the difference between direct and indirect taxes?
Direct taxes are taxes that are levied on individuals or entities directly by the government, such as income tax or property tax. Indirect taxes, on the other hand, are taxes that are levied on goods and services, such as sales tax or value-added tax (VAT).
What is a progressive tax system?
A progressive tax system is one in which the tax rate increases as the income of the taxpayer increases. This means that those with higher incomes pay a higher percentage of their income in taxes than those with lower incomes. The idea behind a progressive tax system is to create a more equitable distribution of the tax burden, with those who can afford to pay more contributing a larger share.
What is a regressive tax system?
A regressive tax system is one in which the tax rate decreases as the income of the taxpayer increases. This means that those with lower incomes pay a higher percentage of their income in taxes than those with higher incomes. Regressive taxes are often criticized for being unfair, as they place a greater burden on those who can least afford it. Examples of regressive taxes include sales tax and excise taxes on goods like gasoline or cigarettes.