What Is a Tax Gross-Up?

Lump sum tax

Total tax

Right!

Lump sum tax

Also known as "one lump-sum tax", it is a kind of tax conceived according to the "absolute fairness" principle in tax theory. It only produces an income effect and does not bring a substitution effect. This tax is levied on individuals or enterprises, regardless of their income and wealth, and regardless of their economic behavior. It is divided into several levels according to the type of enterprise or individual, and each type of enterprise or individual is required to pay a fixed tax. Its characteristics are not linked to the number of taxable objects. For example, if a certain type of individual is levied a total amount of monthly taxes regardless of their income, or if a tax is imposed on a certain type of enterprise, it is related to the output of the enterprise Nothing. The tax strives to have the least impact on people's production and consumption decisions, minimizes the interference with the rational use of resources, and strives to be neutral, while also preventing people from using behavioral adjustments to avoid taxes. But because the tax reduces the amount of people's consumption and savings, it will eventually affect people's economic behavior, reduce people's demand for certain goods, or reduce people's enthusiasm for work. But its impact and interference are smaller than other taxes such as income tax and turnover tax. So far, this tax is a theoretical assumption and has not been implemented. ^[2]