Progressive: Progressive taxes claim an increasing proportion of income as income increases. The burden of a progressive tax in theory falls mainly on those who earn higher levels of income. This is because the more income u make the higher level of tax is paid out of the dollar as shown on

the diagram (to the right). This diagram is not quite accurate because rather than a sloping increasing tax it should be a more stepped approach. This is because within Australia we have a system of taxes which create a step like function between the relationship of income and tax.

Regressive: This has the opposite effect to the progressive tax because it takes a decreasing proportion of income as income increases. This means as income increases tax decreasing. This has a much greater burden on low income earns because the prices for say cheap items such as socks the same amount of tax on the item is paid for the low income earner as the high income earner. This has a benefit on people who earn high levels of income but a reverse negative effect for low income earners. This is because a larger amount of his/her income is spent on the socks instead of the higher income earner.

Proportional: The tax will take a constant proportion of income, no matter how much is income is being earned. The best example of this within Australia is company tax; this is where all companies within Australia no matter what size or how much they earn pay a constant rate of 30% of their profits to the government. A diagram for this is shown (on the right)