Principles of Taxation

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Chapter 4

Basic Concepts of Taxation...cont

Regressive Tax

  • A regressive tax is a tax whose burden, expressed as a percentage of income, falls as income increases.

  • Excise taxes (taxes on specific commodities) are regressive. The VAT is also regressive

Marginal versus Average Tax Rates

  • The average tax rate is the total amount of tax you pay divided by your total income.

  • The marginal tax rate is the tax rate you pay on any additional income you earn.

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