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.
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.