What is a ‘Regressive Tax’
A regressive tax is a tax that takes a larger percentage of income from low-income earners than from high-income earners. It is in opposition with a progressive tax, which takes a larger percentage from high-income earners. A regressive tax is generally a tax that is applied uniformly to all situations, regardless of the payer.
BREAKING DOWN ‘Regressive Tax’
A regressive tax affects people with low incomes more severely than people with high incomes. While it may be fair in some instances to tax everyone at the same rate, it is seen as unjust in other cases. As such, most income tax systems employ a progressive schedule that taxes high earners at a higher percentage rate than low earners, while other types of taxes are uniformly applied. Examples of regressive taxes include sales taxes, user fees and, arguably, property taxes.