Categories: General Tax Terms
Regressive Tax
A regressive tax is a type of tax system where the tax rate decreases as the taxable amount increases. This means that lower-income individuals pay a higher percentage of their income in taxes compared to higher-income individuals.
In practice, regressive taxes often manifest in the form of sales taxes, excise taxes, or certain fees that do not account for the taxpayer’s ability to pay. For example, if a sales tax is applied uniformly to all purchases, a lower-income individual might spend a larger portion of their income on taxed goods compared to someone with a higher income, leading to a disproportionate tax burden on the former.
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