What is a regressive tax?

By Ritesh|Updated : September 7th, 2022

Applying a flat tax to a large percentage of low-income earners rather than high-income earners is called a regressive tax. Understand tax system in India - types, GST, VAT, objectives, limitations, laffer curve. In regressive taxation, the tax rate decreases as the taxable amount increases. It is opposed to a progressive tax, which takes a larger percentage from high-income earners.

Functions of Regressive Tax

  • This tax places a greater burden on low-income earners than high-income earners, for whom the same dollar amount equals a much larger percentage of total earned income.
  • There is a progressive tax on income in the US and some other developed countries, but other taxes are collected uniformly, such as sales tax and user fees.
  • Although the United States has a progressive income tax system, meaning that those with higher incomes pay a higher percentage of taxes each year compared to those with lower incomes, we do pay certain levies that are considered regressive taxes.
  • Some of these include state sales taxes, user fees, and to some extent, property taxes.

Summary:

What is a regressive tax?

A regressive tax burdens the wealthy less than it does the poor, and people with higher incomes pay less in taxes as a result. Higher-income earners pay a higher proportion of income tax than lower-income earners under a regressive system as opposed to a progressive system.

Comments

write a comment

Featured Articles

Follow us for latest updates