Submitted to: Ma’am Mabrooka

Submitted by: Zainab Islam

Roll# MBME-021R19-10
Subject: Business Economics
Dated: 17-8-2019
 Types of Tax Structures and its Examples
Progressive Tax

Progressive taxes are those that charge a higher percentage on individuals who
have a higher income. Proponents of progressive taxes argue that they are effective
because the rich have a greater ability to pay than the poor. Opponents of
progressive taxes say it is unfair to tax one group more than another. Examples of
progressive taxes include the United States federal income tax, the federal estate
tax and the gift tax.

 Federal Income Tax

In 2012, the first $8,700 of income for single people is taxed at a rate of 10
percent. Income between $8,701 and $35,350 is taxed at 15 percent. The rate
continues to increase as income increases to a maximum tax rate of 35 percent for
income over $388,350.

 Federal Estate Tax

The estate tax in the United States is only charged on estates valued at over $5.12
million. There are also several deductions that can reduce the value of a farm by
$820,000 or the value of a small business by $1,100,000. According to the Internal
Revenue Service, this tax only affects the wealthiest 1 percent of Americans. For
estates valued at less than $5,120,000, the tax rate is zero.
  Gift Tax

The gift tax is similar to the estate tax in that the tax only applies to expensive
gifts, making it a progressive tax. The gift tax is generally paid by the person
giving the gift and does not apply to any gifts of $13,000 per person per year. This
means that you could give up to $13,000 in gifts to any number of people and
never have to pay the gift tax.

Regressive Tax

A regressive tax is a tax that tends to amount to a greater percentage of total

income for those with lower incomes more than those with higher incomes. In
other words, regressive taxes disproportionately burden the poor or middle class.
This is the opposite of a progressive tax. There are many types of taxes that are
considered regressive.

 Taxes on Essentials

Taxes on essential goods and services that are required for living such as food and
clothing are often considered regressive taxes. Everyone needs to eat and clothe
themselves, regardless of how much money they make, and people with less
income tend to spend a greater proportion of their incomes on basic essentials than
those with high incomes. This means sales taxes on essentials amount to a greater
percentage tax on those with lower income. According to the IRS, taxes on things
like gasoline and motor fuels can also be considered regressive.

 Sin Taxes
Sin taxes are taxes on items that are thought to lead to undesirable social outcomes
such as poor health, like alcohol and cigarettes. Both alcohol and cigarettes are
heavily taxed, in part, to discourage people from using them. According to the IRS
these taxes are regressive.

 Social Security

Social security is a tax on income earners that helps provide social protections such
as giving money to retirees, those in poverty and disabled people. The social
security tax can be considered a regressive tax because social security obligation is
limited to a certain fixed amount of income. According to The Economist, social
security is charged on the first $106,800 of income (as of 2009); this means
individuals who earn more than that amount do not pay social security tax on
income that exceeds the limit. This means those with very large incomes will pay
an extremely low percentage of total income to social security.

 Fixed Taxes and Fees

Excise taxes are taxes designed to fund public goods through fees that are often
charged at fixed rates. Any type of tax that charges a single flat cost or fee to the
taxpayer can be considered a regressive tax, since a flat cost will amount to a
greater percentage of income for low-income earners than high-income earners.

Proportional taxes

A proportional tax is an income tax system where the same percentage of tax is
levied on all taxpayers, regardless of their income. A proportional tax applies the
same tax rate across low, middle, and high-income taxpayers.
  Sales Tax

A sales tax can also be considered a type of proportional tax since all consumers,
regardless of earnings, are required to pay the same fixed rate. The sales tax rate
applies to goods and services, and the income of the purchaser is not a part of the
equation.

 Medicare Tax

Medicare taxes are also proportional since the same tax rate is applied to any
earned income up to the Social Security wage base limit, which, for 2019, is
$132,900. The Medicare tax is a proportional tax that applies to all earned income
and is equal to 2.9%