The taxes that are usually thought to be progressive include individual income taxes and estate taxes. Income taxes that are declarably progressive, however, might become less so for the upper-income class—in particular if a taxpayer is allowed to lessen his tax base by nominating deductions or by taking particular income elements from his taxable income. Proportional tax rates that are applied to lower-income demographics would also be more progressive if such exemptions of a personal nature are made.

Income measured over a given period might not definitely give the most accurate measure of taxpaying requirement. For example, transitory rises in income can be saved, and in temporary declines in income a taxpayer might opt to finance consumption by reducing savings. Therefore, if taxation is regarded alongside “permanent income,” it will be less regressive (or more progressive) than when it is held in comparison with annual income.

Sales taxes and excises (excepting those on luxuries) tend to be regressive, because the portion of own income consumed or spent for specific goods decreases as the level of personal income increases. Poll taxes (aka head taxes), calculated as a standard amount per capita, patently are regressive.

It is hard to determine corporate income taxes and taxes on business as progressive, regressive, or proportionate, principally because of the uncertainty around the ability of businesses to shift their tax expenses (see below Shifting and incidence). This difficulty of dictating who bears the tax burden depends crucially on whether a national or a subnational (that is, provincial or state) tax is being considered.

In assessing the economic purpose of taxation, it is important to distinguish between various points of tax rates. The statutory rates will include those nominated in law; generally these are marginal rates, but occasionally they are mean rates. Marginal income tax rates note the fraction of incremental income that is demanded by taxation when income increases by one dollar. Thus, if tax onus rises by 45 cents when income increases by one dollar, the marginal tax rate is 45 percent. Income tax regulations often contain graduated marginal rates—i.e., rates that grow as income grows. Careful analysis of marginal tax rates should take into account provisions as well as the formal statutory rate structure. If, for example, a particular tax credit (reduction in tax) lessens by 20 cents for each one-dollar rise in income, the marginal rate is 20 percentage points more than nominated within the statutory rates. Since marginal rates signify how after-tax income increases or decreases in response to changes in before-tax income, they are the important ones for appraising incentive effects of taxation. It is even more complicated to realise the marginal effective tax rate to apply to income from business and capital, since it may be reliant on factors such as the structure of depreciation allowances, the deductibility of interest, and the provisions for inflation adjustment. A basic economic theorem holds that the marginal effective tax rate in income from capital is nil under a consumption-based tax.

Average income tax rates determine the portion of total income that is required in taxation. The pattern of average rates is the one that is necessary for assessing the distributional equity of taxation. Under a progressive income tax the average income tax rate rises with income. Average income tax rates commonly grow with income, both because personal allowances are allowed for the taxpayer and dependents and due to that marginal tax rates are graduated; on the flip side, preferential treatment of income received for the most part by high-income households can dampen these effects, allowing regressivity, as signified by average tax rates that decline as income rises.

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