What Is a Regressive Tax?

A regressive taxes is one wherein the mean tax burden decreases v income. Low-income taxpayers salary a disproportionate share of the taxes burden, when middle- and also high-income taxpayers shoulder a relatively small taxes burden.

You are watching: Which best describes a regressive tax?

Expand an interpretation

What space Some instances of Regressive Taxes?

The load of a tax outcomes from both the design of a tax and the true economic burden the a tax. Regressive taxes space often level in nature, an interpretation that the same price of tax applies (generally) nevertheless of income. This taxes incorporate most sales taxes, payroll taxes, excise taxes, and also property taxes.

Because the same price of tax applies regardless that one’s income, a lower-income individual may confront a higher tax burden 보다 a higher-income individual with the same amount the consumption..

For example, if two individuals who do $20,000 and also $40,000 spend $100 on garments with a 5 percent sales taxes rate, the lower-earner will be paying much more taxes together a re-publishing of their earnings than the higher-earner. The same have the right to be true the two neighbors with similar property values and also property taxes burdens. They will pay the exact same level of building taxes regardless of their income.

How Regressive space Excise Taxes and also Tariffs?

Excise count are an especially regressive. Families in the lowest one-fifth by income faced an median federal excise tax price that is ripe times higher than the mean excise tax rate confronted by the optimal 1 percent the households.


The distributional results of a tariff (the economic burden it places on households across income levels) have tendency to it is in regressive, burdening lower-income households much more than higher-income households. Tariffs eventually fall ~ above the determinants of production and reduce taxpayer labor and also capital income. This occurs either by increasing prices or to reduce wage and capital income.

See more: What Is A Function Of The Distribution Layer? ? Distribution Layer Functionality

Analysis the imposed and threatened U.S. Tariffs under the Trump management (as of December 2018) mirrors that lower- and middle-income households experience fairly larger fall in after-tax income.

Combined Distributional affect of Imposed and also Threatened U.S. Tariffs together of December 2018Income PercentileChange in After-Tax Income
Lowest Quintile (0% come 20%)-1.37%
Second Quintile (20% come 40%)-1.32%
Middle Quintile (40% to 60%)-1.37%
Fourth Quintile (60% come 80%)-1.31%
Top Quintile (80% to 100%)-1.14%


80% come 90%-1.25%
90% come 95%-1.24%
95% come 99%-1.18%
99% to 100%-0.95%

Source: Tax structure Taxes and also Growth Model, April 2018