Economics Fiscal Policy Questions
Progressive taxes refer to a tax system where the tax rate increases as the taxable income or wealth of an individual or entity increases. This means that individuals with higher incomes or wealth pay a higher percentage of their income or wealth in taxes.
Regressive taxes, on the other hand, are taxes that take a larger percentage of income or wealth from individuals with lower incomes or wealth. In this type of tax system, the tax rate decreases as the taxable income or wealth increases. As a result, individuals with lower incomes or wealth end up paying a higher proportion of their income or wealth in taxes compared to those with higher incomes or wealth.
Proportional taxes, also known as flat taxes, are taxes that apply the same tax rate to all individuals or entities, regardless of their income or wealth. This means that everyone pays the same percentage of their income or wealth in taxes, regardless of their financial situation.
In summary, progressive taxes have higher tax rates for higher incomes or wealth, regressive taxes have higher tax rates for lower incomes or wealth, and proportional taxes have a consistent tax rate for all income or wealth levels.