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Economics Unit 4 > Taxation > Flashcards

Flashcards in Taxation Deck (7)
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1

What is progressive tax?

When those on higher income levels pay a higher % of their income in tax

2

What is regressive tax?

An increase in income leads to a smaller % of their income going on the tax e.g VAT

3

What is proportional tax?

Takes the same % of income whatever band

4

What is direct tax?

Takes from the people's earnings e.g income tax

5

What is indirect tax?

Paid by firms selling good-- VAT

6

What are the impacts of increasing rate of income tax? (7)

1. Higher revenues--
2. Tax evasion
3. Incentives to work
4. Redistribution
5. Aggregate demand
6. Trade balance
7. Discourage FDI

7

Evaluation of higher income taxes (2)

1. Disincentives- a higher income tax causes people not to work---- ladder curve!!!
2. Depends how tax revenue is used- infrastructure can help in long run, welfare no help