Progressive Tax System

In this system, individuals earning high income pay a high proportion of tax with a rise in revenue. Continuous tax system reduces inequality in society. People with low income pay lower tax rate compared to those earning a high salary. A progressive tax system leads to happiness among the citizens since there is no inequality, well being of nations and satisfaction and equal distribution of public goods such as infrastructure and education. A progressive tax system has led to a uniform distribution of income, economic growth, and educational attainment.

Proportional tax system

In a proportional tax system, everyone pays an equal percentage of his or her income tax. Increase or decrease in income does not alter the tax rate. Russia and Latvia are the only countries which use proportional tax rate system. The only advantage of the system is that it is easier to manage everyone in the country.

Regressive Tax System

Increase in income decreases the tax rate. A population with individuals earning flat income face many challenges of high tax rates. It reduces the economic growth of a country.