01:220:102 Lecture Notes - Lecture 10: Sales Tax, Tax Bracket, Payroll Tax

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Published on 5 Oct 2018
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Professor
ECON 102 Lecture 9 - Taxes cont.
Types of Tax:
- Progressive - Income rises, so do average tax rates
- Regressive - Income rises, average tax declines
- Proportional - Income rises, average tax stays the same
- Graph below shows the relationship of avg tax and income in each tax structure
http://www.austaxpolicy.com/wp-content/uploads/2016/02/simple-progressive-regressive-chart.png
Average and Marginal Tax:
- Average tax measures tax burden
- Marginal tax measures the effect of taxes on household decisions (ex. Work
more or less; riskier or safer investments)
- Average Tax = Tax Liability / Income
- Marginal Tax = Change in Tax Liability / Change in Income
Applications:
In the US the following taxes adopt the following structures:
- Income tax is progressive
- Sales tax is regressive
- Corporate tax is proportional
- Payroll tax is regressive
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