What are the 3 types of taxes? | Bryan Patrice

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Tax is a compulsory financial cost or some kind of levy imposed on the taxpayer (an individual or legal entity) by government organizations to fund government spending and a variety of public spending. Failure to pay, along with avoidance or resistance to taxation, punishable by law.

There are many taxes we pay in our daily lives. They affect our salary, the price of the products we buy, the services we use, housing, cars and much more.

And while sometimes blurred the lines between the various types of taxes, have no idea what you pay for when you have to pay, and how much you pay can make it easier to manage your personal finances.

Three main types of taxes

While there are many individual taxes, the following are the three main types of taxation. They describe ways that a tax applies to the person or group being taxed.

Progressive taxes

This is the kind of taxes while you have more income to be taxed, you pay an average rate higher. This mostly relates to income tax. The term "progressive" is derived from the fact that with the increase in taxable income, the tax rate will be higher.

Federal income tax brackets is an example of a progressive tax. The federal government uses the marginal tax rate, where income tax within a certain distance on one level and income in the higher range at a higher level. Progressive income tax may also be referred to as a graduated income tax.

Regressive taxes

The opposite of progressive tax is a regressive tax. This is a taxation method where you have more to be taxed, the average tax rate is lower. One example of a regressive tax is a Social Security tax, payroll tax types (more on that later).

All taxpayers have to pay Social Security taxes. For 2019, the revenues of up to $ 132 900 are taxed. The higher your income goes over the limit, lowering the average rate that you pay.

Proportional and flat taxes

A proportional tax is one where the amount you pay is proportional to how much you have. You'll also hear people refer to this as a flat tax. For example, imagine you live in a country with a flat income tax of 5%. Each taxpayer will pay 5% of its taxable income. Because everyone pays a proportional amount of their income, this is a proportional tax.