In other words, all taxpayers would pay the same percentage of their income to the government irrespective of their total earnings. Summary Definitionĭefine Proportional Taxes: Proportional tax means a taxation system where tax rates remain the same for every individual in the system no matter what their income levels are.Definition: A flat tax, also called a proportional tax, is an income tax that enacts a constant proportional rate to all taxpayers regardless of income. On the other hand, Joseph would have $47,400. Let’s assume they live the same lifestyle with the following expenses:Īfter those taxes and expenses, Tyler would be left with $12,600 to pay for all other expenses or save. When other factors come into play, the tax burdens may fall more heavily on the workers who earn less. Tyler paid less because he earned less and Joseph paid more because he earned more. Both paid a ratable portion of their income. On the other hand, if Tyler worked as a general manager at a grocery store and earned $60,000, he would owe $7,800. If Joseph earned $100,000 a year as a surgeon, he would owe the government $13,000 at the end of the year. Let’s assume their flat tax rate is 13 percent. The difference in payment would lie in the amount of money earned by each man and the implications would lie in their necessities and liabilities. If Joseph and Tyler both had steady jobs with guaranteed incomes for the year and lived in a country that imposed proportional taxes, both men would be required to pay the same percentage of their income to the system.
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