Taxation Average rate of tax - percentage of an individual's income that goes to the government (so total tax paid/total income x100) Marginal rate of tax - percentage of tax paid on each additional dollar of income. Progressive taxes - where the marginal rate of tax rises as the amount subject to taxation rises. For example, income tax. As the amount of income increases, the rate of tax on each additional pound earned goes up, increasing the average rate of tax. - Good for reducing inequality. Regressive taxes - where the marginal rate of tax decreases as the amount subject to taxation rises. For example, excise duties (on tobacco/alcohol, etc.) As the amount spent on these goods increases, the rate of tax decreases, as a smaller percentage of the income is spent on tobacco/alcohol. The average rate of tax is lower for those with higher incomes. Therefore these taxes often are of a greater burd...