Title: Regressive Tax Examples | Different Examples with Explanation
Headings: Regressive Tax Examples
Regressive Tax Examples
Definition of Regressive Tax
Explanation
Examples of Regressive Tax
Example #1
Solution:
Example #2
Solution:
Example #3
Solution:
Example #4
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Conclusion
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Content: Regressive Tax Examples | Different Examples with Explanation
Regressive Tax Examples
Definition of Regressive Tax
A tax system is considered to be regressive when it puts more burden on the poor or low-earning populations than the rich or high-earning population. The reason it casts a heavy burden on poor people is that it imposes a flat or uniform rate of taxes irrespective of the level of distribution of the income in the country or economy. Taxes like sales tax, fuel tax, excise tax, social security payroll fall under the purview of regressive taxes. Explanation
Though regressive taxation system charges the same dollar value of the tax amount from rich as well as poor people but it is harsher for poor people because they have a lesser amount of income left to buy essential commodities for living purposes after paying these taxes. On the other hand, for rich people, the flat rate of tax does not impact much since they will still be able to buy everything needed to maintain their standard of living after payment of these taxes. This is the reason it is said that regressive taxes take a higher percentage of poor or low-earning populations’ income. Start Your Free Investment Banking Course
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Some of the examples of the regressive taxes are as below: Sales tax is applied uniformly to the rich as well as poor people by the government. Anyone buying goods with sales tax irrespective of their level of income will have to pay the amount at the uniform rate. User fees i.e. fees levied by the government for entering the museum, toll charges on roads and bridges, the entry fees for parks, costs of driving license, identification cards, etc.