Definition

• According to the IRS, a proportional tax "is a tax in which all income levels are taxed at the same rate." The proportional tax is also known as a flat tax.
  
  

Examples

• A real estate tax is an example of a proportional tax, according to the IRS. Real estate taxes are computed by multiplying the assessed value of a property by a predetermined, fixed (flat) tax rate. Sales taxes are also proportional. Like real estate taxes, they are determined by multiplying a predetermined fixed tax rate--this time, by the value of the goods purchased.
  
  

Considerations

• The IRS states that proportional taxes "are usually considered unfair because they have a regressive effect on the taxpayer's total income." This is presumably why proportional taxes are not commonly used when taxing personal income.