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The Principles of
Taxation systems are centered around two basic ideas. One is that people that benefit from services provided by tax revenues should be the ones who pay for them. Secondly, taxes should be paid in proportion to the number of benefits or services that an individual receives.
Three Types of Taxes
Taxes can be proportional, progressive, or regressive in nature.
A proportional tax is equal in that it sets the same percentage of income taxation on everyone regardless of income. So for individuals, as their income rises or falls, they pay the same percentage in tax.
A progressive tax imposes a higher percentage rate of taxation as incomes go up. So as people make more money they pay a higher percentage of that income in tax, and the percentage goes down if their income goes down.
Regressive taxes are the opposite of progressive. They impose a higher percentage of taxes on lower incomes than on higher incomes. Often these taxes are not income taxes, but other types of taxes that set a steady rate, but wind up hitting lower-income people harder than higher-income people. For example, if there is a 5% sales tax on goods and services it would be regressive because while it is taxing everyone at the same proportion lower-income individuals will pay a higher percentage of their overall total income than a higher income individual would.
What Makes for a Good Tax System
This course covers lots of different taxes and tax systems that are used in Zambia. This research paper is your opportunity to apply what you have learned and propose changes to the Zambian tax system. Detail what kind of tax system you would set up for Zambia. What taxes would you get rid of or modify? State what changes you would make and why?
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- Which is the following is an example of a proportional tax? Multiple Choice an alcohol tax a flat tax federal excise tax on gasoline a tax that takes a larger percentage from high-income earners than it does from low-income individuals, such as the U.S. income tax systemarrow_forwardLet's walk through the median voter theorem in a little more detail. Consider a town with three voters, Enrique, Nandini, and Torsten. The big issue in the upcoming election is how high the sales tax rate should be. As you'll learn in macroeconomics (and in real life), on average, a government that wants to do more spending has to bring in more taxes, so "higher permanent taxes" is the same as "higher government spending." Enrique wants low taxes and small government, Nandini is in the middle, and Torsten wants the biggest town government of the three. Each one is a stubborn person, and his or her favorite position-what economic theorists call the "ideal point-never changes in this problem. Their preferences can be summed up like this, with the x denoting each person's favorite tax rate: Enrique 0% N O Sales tax rate Nandini P Torsten 20% Suppose there are two politicians running for office, N and O (so ignore P for now). Enrique will vote for Choose your answer. Nandini will vote for…arrow_forward1) Suppose the figure represents the Laffer Curve for income taxes on high-income earners. If the tax rate on high-income earners is 55% a) marginal tax revenue will increase if tax rates are increased. b) marginal tax revenue is negative. c) the tax rate is optimal. d) marginal tax revenue is positive. 2) Suppose the figure represents the Laffer Curve for income taxes on high-income earners. Which of the following best explains the shape of the Laffer Curve? a) As tax rates rise, individuals work the same amount but conceal more income from tax authorities. b) As tax rates rise, individuals work the same amount and the same amount of income is available to tax. c) As tax rates rise, individuals work more and more income is available to tax. d) As tax rates rise, individuals work less and less income is available to taxarrow_forward
- A country is using a proportional tax when Group of answer choices its marginal tax rate equals its average tax rate. its marginal tax rate is less than its average tax rate. its marginal tax rate is greater than its average tax rate. it uses a lump-sum tax.arrow_forwardA proportional tax, sometimes referred to as a flat tax, is a kind of income tax wherein all taxpayers are taxed at the same percentage rate, no matter how high or low their income. A proportional tax system means that everyone experiences the same tax rate, whether low, middle, or high-income. Those who support a proportional tax argue that the system is fairest because the rules are simple and straightforward and no one is exempt; however, there is a huge con of proprtional taxes. Explain what that is. Essayarrow_forwardDo a comparative analysis of taxation in Kenya, Uganda and Tanzania showing how these countries have addressed the following tax matters: Income tax Customs tax Excise tax Value added taxarrow_forward
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