Taxes
Flat rate- tax system with a constant marginal tax rate. This kind of tax system has a regressive effect on individuals in the form of an excise tax. Products such as alcohol, tobacco and petrol, which are heavily taxed and are a major contributor to total government tax revenue is a flat rate tax as everyone who buys these products pays the same tax. But the poor who buy these products give up a higher proportion of their income than the rich do. This can be seen in Figure 3 as a Regressive tax, as the Total Tax Payment for the Regressive tax decreases as Gross income increases.
A Flat tax rate can also be applied to income though. When this occurs, the Flat tax rate becomes a proportional tax, as everyone has the same percentage of their income taxed, as shown by the Proportional Tax line in Figure 3
Ad valorem tax- tax based on the assessed value of real estate or personal property. An example of an ad valorem tax would be property tax. Property tax increases if you live in a nice neighborhood, meaning someone who lives in a nice neighborhood will pay more property tax than someone who lives in a neighborhood with a higher crime rate.
Flat rate- tax system with a constant marginal tax rate. This kind of tax system has a regressive effect on individuals in the form of an excise tax. Products such as alcohol, tobacco and petrol, which are heavily taxed and are a major contributor to total government tax revenue is a flat rate tax as everyone who buys these products pays the same tax. But the poor who buy these products give up a higher proportion of their income than the rich do. This can be seen in Figure 3 as a Regressive tax, as the Total Tax Payment for the Regressive tax decreases as Gross income increases.
A Flat tax rate can also be applied to income though. When this occurs, the Flat tax rate becomes a proportional tax, as everyone has the same percentage of their income taxed, as shown by the Proportional Tax line in Figure 3
Ad valorem tax- tax based on the assessed value of real estate or personal property. An example of an ad valorem tax would be property tax. Property tax increases if you live in a nice neighborhood, meaning someone who lives in a nice neighborhood will pay more property tax than someone who lives in a neighborhood with a higher crime rate.