Distinguish between a progressive and regressive tax

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Distinguish between a progressive tax system and a regressive tax system

Governments use policies of taxation and government spending in a variety of ways. One of these factors is used to affect distribution of income in an economy. The government tries to correct inequality to a certain extent, so that the spread of income and living standards amongst its citizens will be more equal and fair. There are two main types of taxes in a country. I will be distinguishing between the fairness of the tax, and the effect they have on a different individuals in society.

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The first type of tax is progressive taxes. A progressive tax is one where, as your income rises, you pay more tax in proportion to your income. Whereas a regressive tax is one where as your income rises, the amount paid in proportion to income falls. Therefore the first difference between progressive and regressive tax systems is that in progressive taxes, average tax rises as income rises, whereas in the latter, average tax falls as income rises. The two methods of taxation have vastly different effects on different classes of society. Richer citizens will be more affected by progressive taxes, as ...

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