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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: For instance, the US has a marginal tax rate that ranges from 10 percent for those earning under $10,000, to 37 percent for those earning over $510,000. Whilst many will see the rich pay less as a percentage, the actual tax rates are not regressive. Instead, the complexity of the tax system allows such individuals to manipulate the rate they pay. The complexity of the tax system leads to calls for a flat tax system which is much simpler and less bureaucratic. However, a flat tax can also be seen as regressive in itself. This is because one extra dollar to someone earning $1 million is worth much less to them than someone earning $10,000. So whilst the tax rate is the same, it is causing much more financial distress on low-income households. A more obvious example is that of a sales tax. Although the rate may be flat across the board, it disproportionately affects the poor as they spend a higher proportion of their income on goods and services – which those on higher incomes have a greater tendency to save. Examples of Regressive Tax
Among many others, examples of a regressive tax include;