Question

1. Which type of tax is indicated in the above graph?
2. With the help of any three points distinguish between Proportional tax and the above type of tax.
3. State any three points of distinction between progressive taxation and regressive taxation.

Answer 1

a. The graph indicates a Progressive Tax system.

b. 

Sr. No.	Basis	Proportional Tax	Progressive Tax
1.	Tax Rate Behavior	The tax rate remains completely constant for all income levels.	The tax rate increases as the income level rises.
2.	Equity/Fairness	It is less equitable because it takes the same percentage from poor and rich.	It is highly equitable because it places a higher burden on the rich.
3.	quity/Fairness	It leaves the relative gap between rich and poor unchanged.	It actively helps reduce the gap between rich and poor.

c.

Sr. No.	Basis	Progressive Tax	Regressive Tax
1.	Tax Rate Behavior	The tax rate increases as the income level rises.	The effective tax rate decreases as the income level rises.
2.	Real Burden	The real financial burden falls more heavily on the rich.	The real financial burden falls more heavily on the poor.
3.	Examples	Personal income tax is a standard example.	Indirect taxes like sales tax or GST on essentials are examples.