Taxation is an important aspect of the country's economy and growth. Different types of taxes imposed on the people of a country, in order to generate finance for different purposes. These purposes may include expenditures made in war, law enforcement, and economic growth, infrastructure development and the functioning of Government itself. And also funds public services, such as education, health care, transportation, and unemployment taxes. Tax may be progressive, regressive, or proportional, depending on several factors. Retrogressive taxes indicates that taxes more tax burden on the poor, compared with the rich. It creates a relationship between contrast ratio and the ability of taxpayers to pay tax based on consumption, income or assets that the taxpayer owns.
Regressive tax system converts the tax burden disproportionately to the poor, and tend to reduce the burden on people with high paying capabilities. It involves a form of taxation that is somewhat unfair individuals paid modest, relative to their income, as is standard on all tax categories of people (who are highly paid and payment of humble). Regressive taxation is used in reference to fixed taxes, where each individual is taxed on an amount equal to the money, regardless of income level. For example, federal and state taxation of cigarettes and reactionary, and low-income smokers pay the highest taxes in income compared with high-income smokers. However, on the positive side, taking advantage of tax declared like this is that it helps to free up more funds for investment, high-income individuals, as they tend to save more of their income.
The difference between progressive and regressive tax
Progressive taxation refers to a form of taxation with income paid by the individual, and increases with increasing income. People with higher income pay more total taxes at the top rate. Thus, a person with an income of $ 200,000 to pay tax of 20, 000 (tax rate 10%), whereas the person an income of $ 50,000 would pay a tax of $ 4, 000 (tax rate of 8%). In the case of regressive tax, proportion of income paid in taxes, decreases with an increase in income. This is in contrast to direct progressive, with taxes paid, rises with increasing income. The sales tax on grocery products to be a form of regressive taxation because of the fact that the individual pays the poor to the same amount of tax as a wealthy person. The US tax system contains a mixture of both progressive and regressive taxes.
Regressive tax system also includes taxes on necessities such as transport, housing and clothing. This is because the income elasticity of demand for these essentials is less, thus increasing the proportion of the budget is a modest person who paid the tax. Taxes on alcohol and tobacco are also a form of regressive taxation because both the lowly paid individuals highly paid consume these products. Property taxes sometimes also comes under this, because property taxes have a high percentage of the budget of an individual who has a low income, than it does for an individual with a higher income.
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