Types of Taxes: Regressive, Proportional, and Progressive Taxes – The Tax Planet Tax systems in the U.S. have three major categories: regressive, progressive, and proportional. If we talk about the effect, Federal Income Tax Return can be a major hassle if you don’t know its impact. Generally, the regressive tax affects the lower-income group more as compared to the higher income group. Whereas Proportional tax has an equal impact on all classes: low-, middle-, and high-income. Now comes the progressive tax, which has more of an effect on higher-income individuals. ● Regressive Taxes A regressive tax is a type of tax one that is imposed as a harsher burden on lower-income families as compared to the ones with higher incomes. Low-income families pay a higher amount of regressive taxes in the form of sales tax, excise taxes, property taxes, consumption taxes, gasoline taxes, and more. Thus, it makes it hard for them to afford them under a regressive tax system as they spend a maximum of their income on basic food habits. ● Proportional Taxes A proportional tax is the one that is imposed regardless of income and has the same effect on all income groups. The US taxation system has nine states that use proportional tax in 2020: Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah. In Contrast, other components of proportional taxes are per capita taxes, gross receipts taxes, and occupational taxes. Proportional taxes benefit the economy as they maintain the balance of savings and expenditure, adding more dollars to the US economy.
Types of Taxes: Regressive, Proportional, and Progressive Taxes – The Tax Planet
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