Question

Explain the difference between progressive taxes and regressive taxes. which type of tax would be better for taxpayers? explain why

Answer 1

Regressive taxes are taxes that have a higher impact on low-income earners in comparison to high income earners and progressive taxes are the opposite. 

An example of a regressive tax is a fixed sales tax of say 8%. Although everyone must pay 8% sales tax, this has a higher burden on lower income earners in comparison to higher income earners. 

Conversely, an example of a progressive tax is an indexed income tax that increases has the taxpayer's income increases. 

Often there is a blend of these tax types in a Country's economic system. In this example a PROGRESSIVE tax would be better for the taxpayers as it would more fairly distribute the tax amongst the spread of income earners, with lower income earners paying proportionally less tax than higher income earners that can afford to pay more.