Sociology Index

Proportional Taxation

In between Regressive Taxation and Progressive Taxation is Proportional Taxation, where the tax rate is fixed as the amount subject to taxation increases. The opposite of proportional tax is fixed tax. Proportional taxation applies equally to the poor and to the wealthy. Flat Tax tax, also called proportional taxation is a constant rate tax system. An example of proportional taxation is ad valorem taxation on houses. Though, because the poor spend a disproportionately higher amount on housing, the ad valorem tax may seem regressive taxation, placing a relatively heavier burden on the poor. In progressive taxation the more well off are taxed at a higher rate than are the less well off.

Flat Tax refers to income being taxed at one marginal rate, in contrast with Progressive Taxation. Unlike proportional taxation, progressive taxation structure progressively increases the percentage of a citizen's income, or wealth, which is paid in tax as income, or wealth, increases. Unlike proportional taxation, Regressive Taxation structure requires the more well-off to pay a lower percentage of their income, or wealth, in tax than a less well-off citizen.

Welfare Effects of Proportional Taxation: Empirical Evidence from Italy, Norway and Sweden. Ugo Colombino and Steinar StrÝm Rolf Aaberge. Abstract: This paper employs a particular labor supply model to examine the welfare effects from replacing current tax systems in Italy, Norway and Sweden by proportional taxation on labor income. The results show that there are high efficiency costs for Norway and low costs for Italy and Sweden associated with the current progressive labor income taxes. However, there appears to be large variation in the distribution of welfare gains/losses. "Rich" households – defined by their pre-tax-reform income – tend to benefit more than "poor" households from replacing the current progressive tax systems by proportional taxation.

Social Goals and Consequences of the Flat Taxation or Proportional Taxation in Bulgaria. Dimitar Ninov.
Abstract: The main goal of the study is to reveal and if possible measure in quantity the main permanent consequences for low, average and high income groups of the population from the introducing of the flat tax, the decreased total size of the obligatory insurance installments, the increased share in them of the personal installments, the increased amount of the minimal wage and of the maximum insurance income.