Question

What is the difference between progressive and regressive methods of taxation? Explain.

Answer 1

Answer

With the progressive taxation method, the tax rate increases as the tax payers income increases while for regressive taxation, the tax rate increases as the tax payers income decreases.

Explanation:

• For progressive taxation method a greater proportion of total taxation falls on people within higher income brackets, while regressive taxation takes greater proportion of total taxation falls on those within lower income brackets.
• For progressive taxation, the poorest, proportionally, pay less tax, while for regressive taxation, the richest proportionally pay more tax.
• For progressive taxation method, income inequality tends to fall, while income inequality tends to rise for the regressive taxation method.