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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

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Regressive Tax Definition
Regressive Tax Definition
Leave a Comment / Fiscal Policy / By Paul Boyce
What is a Regressive Tax
Examples of Regressive Tax
Advantages of Regressive Tax
Disadvantages of Regressive Tax
Regressive Tax Definition
Examples, Advantages, and Disadvantages
WRITTEN BY PAUL BOYCE | Updated 11 October 2020
What is a Regressive Tax
A regressive tax is where the tax rate falls for those who are in higher income brackets. In other words, lower-income households face a higher tax rate – as a percentage of their income – than higher-income groups. For instance, a retail worker earning $20,000 may pay 40 percent in taxes. If there is a regressive tax, then those earning a higher amount will pay less as a percent. So an executive at a big multinational firm may earn $2 million, but only pay 20 percent in taxes. The regressive tax contrasts with a progressive tax which increases alongside income. So the higher the individual’s income, the higher percentage of their salary they pay in taxes. Key Points
A regressive tax is where low income individuals pay a higher percentage of their incomes in taxes, than richer individuals. A flat tax can also be regressive, as the rich and the poor pay the same value, yet as a percentage of their income, the rich pay far less. When a country adopts a regressive tax, it falls disproportionately on the poor, which can lead to inequality and political unrest.