In: Finance
Create a scenario that exemplifies one of the following tax rate structures:
What is Progressive tax rate?
Regressive?
Proportional?
A progressive tax rate is one where the average tax rate increases as the taxable income increases. For example :
A regressive tax rate is one where the average tax rate decreases as the taxable income increases. Examples of regressive taxes are sales tax, user fee and property taxes. Sales tax (GST, VAT etc.), user fee (tolls, license fee etc.) and property taxes (residential taxes, municipal taxes etc.) are paid at a flat rate by everyone irrespective of their income level. Therefore, a high-income individual will pay a lesser average tax rate than a low-income individual.
A proportional tax rate is when the tax rate is same for everyone, irrespective of their income level. For example, some states in the US have a flat income tax rate. The tax rate for all individuals is the same, irrespective of their taxable income