Types of Tax

• What are the three types of taxation discussed?

  Progressive, proportional, and regressive taxation
• What does the average rate of tax (ART) represent?

  Proportion of tax paid to total income
• How is the average rate of tax calculated?

  Tax paid divided by total income times 100
• What characterizes a progressive tax system?

  Higher income leads to a higher average tax rate
• How does a proportional tax work?

  Tax rate remains the same regardless of income
• What is another name for a proportional tax?

  Flat tax
• What is a regressive tax?

  Average tax rate falls as income rises
• How does a regressive tax affect low-income households?

  They pay a higher proportion of their income
• What is the average rate of tax for a low-income worker earning £10,000 with £1,000 fuel duty?

  10%
• What is the average rate of tax for a high-income worker earning £50,000 with £1,000 fuel duty?

  2%
• How does a progressive income tax system work?

  Higher income leads to higher tax rates on bands
• What are the key calculations related to progressive taxation?

  • Taxable income calculation
  • Total income tax paid calculation
  • Average rate of tax calculation
  • Marginal rate of tax calculation
• What are the characteristics of progressive, proportional, and regressive taxes?

  • Progressive: Higher income, higher tax rate
  • Proportional: Same tax rate regardless of income
  • Regressive: Higher income, lower tax rate
• How does the tax band system work in progressive taxation?

  • Different income bands have different tax rates
  • Only income within a band is taxed at that rate
  • Tax-free allowance applies to initial income