Proportional Tax 2020-01-17 08:00:00

Proportional Tax

A proportional tax or flat tax uses the same tax rate regardless of income. Sales taxes are considered proportional. For example, an 8% sales tax is applied for someone who earns $20,000 or $1 million. Income is not factored into proportional tax calculations.

Proportional taxes can be considered regressive because of the tax burden placed on lower-income earners. Someone earning $20,000 taxed at 8% on a $2,500 purchase must pay $200, or 1% of their income. In contrast, someone who earns $1 million pays only 0.02% of their income for the same purchase.

 


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