Regressive Tax

Also found in: Financial, Wikipedia.

Regressive Tax

A tax with a rate that decreases as the taxpayer's income increases.

The result of a regressive tax is that the lower-income taxpayer pays a larger percentage of his or her income in taxes than does the higher-income taxpayer. The opposite of the regressive tax is the progressive tax. With progressive taxes, such as the federal Income Tax, the effective tax rates increase as the taxpayer's income increases. The proportionate tax rate, also referred to as a flat tax rate, remains constant as income rises. Under a proportionate tax system, higher-income individuals pay a greater amount of taxes than lower-income individuals pay, but the ratio is identical.

Consumption taxes, which are taxes on consumer goods and services, are usually regressive because individuals with lower incomes spend a larger portion of their income on these goods and services than higher-income individuals do. Some examples of these consumption taxes are the taxes on alcohol and tobacco, also referred to as "sin taxes."

Some taxes can be a combination of the different tax rates. For example, the Social Security tax is proportional until the taxpayer reaches the maximum income level. However, once the taxpayer's income reaches the maximum cap, all income earned over the cap is not taxed. The result is a regressive tax because the individual earning in excess of the maximum income level is paying a lower percentage of her or his income in taxes than the lower-income individual is paying.

Further readings

Congressional Research Service. 1990. Would a Social Security Tax Cut Increase Progressivity? CRS 90-235 RCO. Washington, D.C.: Congressional Research Service.

Howard, Jay M. 1992. "When Two Tax Theories Collide: A Look at the History and Future of Progressive and Proportionate Personal Income Taxation. Washburn Law Journal 32.

Samuels, Leslie B. 1995. "Remarks of Leslie B. Samuels." Federal Bar Association Section of Taxation Report 11.



Mentioned in ?
References in periodicals archive ?
The major question underlying the present research study was this: "Do states with more progressive tax codes have better health outcomes for children than states with more regressive tax codes?
We have a great deal of work ahead of us defending our industry against the threat of regressive tax increases, ensuring our members may continue to operate in a free and fair manner, and maintaining a strong presence improving the quality of life in our communities.
The poll found that the poor of countries suffer the most from corruption: "Corruption acts as a regressive tax that increases income inequality.
residents get for this regressive tax -- which would bill every mansion, every condo, every car dealership and every mom-and-pop shop the same -- and net the county $1.
Aside from the fact that the researchers think it is OK to tax perfectly nutritious foods, such as cheese, such a move would be a regressive tax on the least well-off, who already spend more of their disposable income on food and drink.
We're happy to see a regressive tax end," Ruth Benn, of National War Tax Resistance, told Sojourners.
It belongs, first of all, to the luxury consumption boom that has gone along with growing income disparities and concentrations of wealth--the beneficiaries of Bush's tax cuts are our patrons--and, secondly, to the same economic forces that have created the global real-estate bubble: lack of confidence in the stock market due to falling prices and corporate accounting scandals, lack of confidence in the bond market due to the rising national debt, low interest rates, and regressive tax cuts.
State-sponsored gambling is a huge regressive tax that falls disproportionately on the backs of the poor.
Fuel duty is a regressive tax that hits those hardest who can least afford it.
Fuel duty is a regressive tax which hits those hardest who can least afford it.
The candidate himself doesn't fully grasp the implications of the regressive tax policies and harmful environmental deregulations he favors, but he knows what his financial backers want, and he's happy to oblige.