Question

progressive tax,  regressive tax,  proportional tax

Who benefits from each and who does the burden fall on in each?

what are the examples of each tax?

Answer 1

Progressive tax system is one in which the tax rate to be paid increases with the income. In such a tax system, people with a lower income benefit as they have to relatively pay a lower tax than people with higher incomes. For example, US income tax system is progressive as the tax rate to be paid increases with income. Here the burden falls on the rich.

Regressive tax system in which the tax rate reduces with the income. In such a tax system, people with higher income benefit as they have to pay a lower tax relative to income than people with lower taxes. An example is a gambling tax. Since low income people are more prone to gambling, the gambling tax is regressive, meaning higher tax rate for low income people and lower tax rate for high income people. Here the burden falls on the poor.

A proportional tax system is one in which the tax rate is same for all income people. For example, say a sales tax of 7% is levied on the consumption of a good. Since both low income and high income people have to pay a tax of 7%, the tax is proportional. This system does not really benefit anybody and shares the tax burden between the rich and the poor.