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Regressive Tax Definition
Examples, Advantages, and Disadvantages
What is a Regressive Tax
Key Points
Examples of Regressive Tax
1. Sales Tax
2. Property Tax
3. Excise Tax
4. Tariff
5. Government Fees
Advantages of Regressive Tax
1. Encourages people to earn more
2. Higher Revenues
3. Increases Savings and Investment
4. Simplicity
5. Reduces a ‘Brain Drain’
Disadvantages of Regressive Tax
1. Inequality
2. Higher Prices
3. Reduces Choice
4. Political Unrest
Related Topics
General FAQs on Regressive Tax
Further Reading

Content: As the rate of taxation is reduced, the cost-benefit of hiring those professionals also reduces. 3. Increases Savings and Investment
In a regressive system, those who earn higher incomes tend to save more, thereby increasing the saving rate of the nation. In turn, those savings become capital available for businesses to invest in new productive and more efficient machinery. 4. Simplicity
A lot of regressive taxes are also flat taxes but are regressive in the fact that they are disproportionately paid for by lower-income households. Yet they are very simple in their implementation. For instance, the sales tax is straightforward – a 5 percent tax on each and every item. By contrast, the progressive income tax has to be calculated to determine the bracket, how much is earnt on that additional income, and how much is charged because it comes from capital. It requires thousands of workers just to administer such a system, but a regressive flat tax is simple.