Progressive, Regressive, and Proportional Taxes:

An alternative classification of taxes is according to the proportion of a person's income ( or the tax base) which is paid in tax.

a) Progressive Tax: A tax is progressive if the proportion of income paid in tax varies directly with the level of income. That is, the higher the income, the higher the proportion of that income which is paid in tax. Personal income tax is a good example of a progressive tax.

b) Regressive Tax: A tax that takes lower percentage of income as income rises. The most regressive tax of all is the poll tax under which every person pays the same amount in tax, irrespective of each person's income.

c) Proportional Tax: A tax is said to be proportional if taxpayers pay the same percentage of their incomes in taxes, at any level of income. An example of proportional tax is the company tax.