• Direct Taxes

  • Examples: You, your parents, businesses
  • Personal Income Taxes: If you mow lawns for $100, you pay a bit directly to the government.
  • Corporate Income Taxes: Apple's new iPhone made billions? They owe the government some of it.
  • Wealth Taxes: Own a mansion? You'll pay property taxes. Inherit Grandma's gold watch? Might be inheritance tax!

• Indirect Taxes

  • Examples: VAT, Sales Tax on that new video game
  • You pay these taxes through sellers, so it's like a sneak attack on your wallet!

• Progressive Tax:

  • Rich Uncle Bill earns more, so he pays more percentage-wise than Cousin Alex.
  • Example: USA's federal income tax system.

• Proportional Tax:

  • Uncle Bill and Cousin Alex earn different amounts, but they pay the same percentage of it.
  • Example: Some U.S. states have a flat income tax rate.

• Regressive Tax

  • Rich Uncle Bill actually pays a smaller percentage than Cousin Alex.
  • Hard to find in income taxes but shows up in indirect taxes like sales tax.

Real-life Experiment

• Alex earns $10,000 and pays $2,000 in taxes (20%)
• Bill earns $20,000
  • Pays $5,000 (progressive, 25%)
  • Pays $4,000 (proportional, 20%)
  • Pays $3,000 (regressive, 15%)