Income tax and Consumption tax

Question

Income tax and Consumption tax

In: 5

Answer 1

The key difference is income taxes can be banded and are typically progressive.

Consumption taxes can be used to incentivise and disincentive consumption of different goods and services by having different rates. They are typically regressive. Poorer people typically spend relatively more of their income on fuel. A fuel levy (or sales tax) would hurt them more.