Question

List, describe and give at least one example of each of the three types of taxes that we pay. And answer: Which do you think are fair or unfair and why?

Answer 1

The three types of taxes that we pay are :- proportional tax; progressive tax; regressive tax.

Proportional tax - This is the tax which is imposed same on every one without distinguishing any high or low income. It has no relation with the income of an individual.

The example of this type of tax is the sales tax. Every individual whether earning less or more or even not working has to pay same sales tax as a customer if he buys a product.

Progressive tax - It is the type of tax which increases as the taxable amount as income of an individual increases.

Example of this type of tax is income tax. The individual with a high taxable income has to pay more tax than the one with a lower taxable income. So this a progressive tax.

Regressive tax - It is the type of tax where tax increases as the taxable amount of income decreases that is opposite of progressive tax.

One example of this is sin taxes. Here poor people are more attracted towards products that needs to pay sin tax. Since the population utilising these products or brands are from low grade, they pay more taxes here, than the people with higher income. These contain cheaper beans which rich people do not want to buy.

The regressive tax is unfair. This is because it costs the people who are earning less to pay more taxes than the one who are earning more. Sometimes these contains items which are counted as essentials for people earning less and hence they are bound to pay more taxes. This results in disbalancing their economic positions.

This at times causes problem for poor people to purchase their daily and essential products. Therefore we can be said that regressive tax is not fair.

The other two types of taxes are fair. This is because if we consider proportional tax, that contains sales tax, then we know that ant product being manufactured costs same whether it be bought by a rich person or poor person. Hence such items will cost same taxes for all individual. So this is fair as no any business should suffer loss in making revenue.

If we see progressive tax, it is also fair as in it the one who earns more Taxable income is intended to pay more tax. Therefore it is fair in all means