The Three Types of Tax: A Comprehensive Guide

What are the types of tax? In this explainer video, Eamonn Butler breaks down the three main categories of taxation: direct taxes, indirect taxes, and transfer taxes. He explores how each type functions, their impact on the economy, and the pros and cons associated with them.

Eamonn delves into direct taxes like income and property tax, discussing their progressive nature and potential to redistribute wealth, while also highlighting how they can blunt economic incentives. He then examines indirect taxes such as VAT and excise duties, noting their efficiency in generating revenue but also their regressive nature. Finally, he touches on transfer taxes like inheritance and gift taxes, acknowledging the ongoing debate about their classification.

This video accompanies Eamonn’s new publication An Introduction to Taxation from the Institute of Economic Affairs. He invites viewers to consider the trade-offs between different tax types and their economic impacts. To learn more about the nature and consequences of various taxes, Eamonn encourages viewers to read his full primer on the IEA website. Join the discussion on tax policy in the comments!