Regressive, Progressive and Proportional taxation
A progressive tax system levies a higher percentage of tax on high income earners compared to lower income earners. This ensures that higher income earners pay a larger proportion of their income than lower income earners.
A regressive tax system levies a smaller percentage of tax on higher income earners compared to lower income earners. This results in higher income earners paying a smaller proportion of their income in taxes than lower income earners. For example, a purchase tax of 10% charged on a commodity which values $100 is bought by a high income earner who receives $10,000 weekly and also by low income earner who receives $1000 weekly. Both income earners will pay $10.00 in taxes. This $10 represents a much higher percentage of the lower income earner’s pay which is .01% than the higher income earner which is only .001% of his income
Under this system all taxpayers pays the same proportion of their income in taxes. The same percentage tax is levied on both high and low income earners. Therefore if the percentage tax charged is 10% of income then each person will pay that proportion of their income.