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What are proportional taxes

what are proportional taxes


Best Answer: Progressive taxes are taxes where the more you have the more you pay, proportionally. For instance under a certain income you pay a certain percentage, above that you pay a higher percentage. Progressive taxes are also taxes that are paid mostly by the richest people, like capital gains, luxury taxes, inheritance, etc.

Regressive taxes are taxes paid mostly by the poor or middle class. Sales tax is a regressive tax for a number of reasons. Even though someone making less money spends less on things, a fixed tax costs them more in terms of their income. A person making $20,000 pays more in sales tax on a used Corolla than a person making a million pays on a new Mercedes Benz, if you look at it in terms of their income.

There is a movement to do away with income tax altogether and replace it with a sales tax. The so-called 'Fair Tax' (badly misnamed!) This means that

someone who has to spend all his income to live pays tax on all of it. Someone who can put half his income away not only doesn't pay tax on that income, but he also gets the earnings, dividends and interest, tax free. It's really just another strategy to further concentrate wealth--which we've been doing in the US for about 30 years now.

Proportional taxation means everyone pays a 'fair' amount based on their income or wealth, their ability to pay.

Income tax is progressive (not as much as it used to be). Sales tax is regressive. FICA is regressive because you only pay it up to a certain amount of income. Estate taxes are progressive since only the richest 1% or so will ever have to pay them. Property taxes can be seen as progressive since they are only paid by people with property, but the rents renters pay include property taxes and are higher in places with higher property taxes.

Category: Taxes

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