What are the effects of a proportional income tax and a progressive flat-rate income tax, that is,...

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What are the effects of a proportional income tax and a progressive flat-rate income tax, that is, one in which there is a lump-sum grant from the government of, say $5,000, and then a constant marginal tax rate on all income. I want you to see whether if the two taxes raise the same revenue, and all individuals have the same income, utility will be higher with the proportional tax."

Robert · Accepted Answer

In proportional income tax system every people have to pay a fixed proportion of their income. 
Here tax rate is same for everyone. Progressive tax system is tax rate increases with income. 
People with higher income have to pay more tax than the people with low income.

What are the effects of a proportional income tax and a progressive flat-rate income tax, that is, one in which there is a lump-sum grant from the government of, say $5,000, and then a constant...

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