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4.5.2 Taxation, image - Coggle Diagram
4.5.2 Taxation
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PROGRESSIVE, PROPORTIONAL AND REGRESSIVE TAXES
Progressive taxes, the proportion of income paid in tax rises as the income increases.
Proportional taxes, proportion of tax remains the same as income increases
Regressive taxes, the proportion of income as tax paid decreases as income rises.
INCENTIVES TO WORK
It is argued that an increase in marginal income tax will DISCOURAGE people to work as the supply of labour is elastic.
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However, there is no hard evidence for the link between income tax and incentives.
Nordic countries.
TAX REVENUE, LAFFER CURVE.
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When the tax rate is increased up to maximum point and after these point there is a fall in tax.
Caused by:
-Disincentives to work
-An increase in tax evasion
-An increase in tax avoidance
-A rise in the number of tax exiles.
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