A tax in which the taxpayer is assessed the same amount regardless of circumstance. An example of a lump-sum tax is a $55 fee on all employees who work in a township. Another example is tag fees on vehicles, which are the same regardless of the income of vehicle owners. Lump-sum taxes are regressive, meaning persons with lower income pay more as a percentage of their income.
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lump-sum taxesthe taxes that raise revenue for the government without distorting resource allocation patterns. INDIRECT TAXES have a distorting effect because they cause consumers to rearrange their consumption patterns, and this rearrangement represents a loss to consumers without any corresponding gain to the government. Similarly, INCOME TAXES can distort choice patterns in affecting the choice between work and leisure. In practice, there are few taxes that do not affect resource allocation other than poll taxes, which simply levy a tax per head of population. See TAXATION, INCIDENCE OF TAXATION, PRINCIPLES OF TAXATION.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005