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Concept
Lump-sum tax
Summary
A lump-sum tax is a special way of taxation, based on a fixed amount, rather than on the real circumstance of the taxed entity. In this, the entity cannot do anything to change their liability.
In contrast with a per unit tax, lump-sum tax does not increase in size as the output increases.
A lump-sum tax is one of the various modes used for taxation: income, things owned (property taxes), money spent (sales taxes), miscellaneous (excise taxes), etc. It is a regressive tax, such that the lower the income is, the higher the percentage of income applicable to the tax.
A lump-sum tax would be ideal for a hypothetical world where all individuals would be identical. Any other type of tax would only introduce distortions.
In the real world, lump-sum tax is not that easily applicable because many people believe that those who have higher ability to pay should pay higher taxes (progressive tax system) and if it were to happen, people with low income would have to be charged very high amounts of money relative to their income and that would be politically unacceptable.
For this reason, lump-sum taxation is rarely seen in real-world applications as it is so difficult to administer due to varying socioeconomic abilities and distributions of wealth. A tax that differs based on factors like ability or income wouldn't be lump sum, and these are also factors that can be disguised or hidden. Nonetheless, lump-sum taxation still provides important theoretical background.
A special type of lump-sum tax is poll tax (also known as head tax) and it is considered to be Pareto efficient because it reduces only people's available income and therefore decreasing their budget constraint while leaving the prices of goods unchanged. This would lead to an income effect and consumers would buy less goods in general and there would not be any substitution effect.
Lump-sum taxing can be often similar to personal property taxes on cars or business equipment or some condominium fees.
Lump-sum taxation is often economically beneficial because it eliminates the possibility of excess burden.
Official source
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