The difference between progressive, proportional and regressive taxes
Taxes differ in how their burden changes as income rises. A progressive tax takes a larger share from higher earners, a proportional tax takes the same share from everyone, and a regressive tax takes a larger share from lower earners.
Formula
Average Tax Rate = (Tax Paid ÷ Income) × 100
Real World
UK National Insurance contributions are often cited as regressive — a worker earning £20,000 pays 12% on most earnings, while earnings above £50,270 are charged only 2%, so the average rate falls as income rises.
Exam Focus
Always use average tax rate, not marginal rate, to classify progressive/regressive — a common exam error is confusing the two.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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