Title: Regressive tax - Wikipedia
Headings: Regressive tax
Regressive tax
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Content: Tobacco in particular is highly regressive, with the bottom quintile of income paying an effective rate 583% higher than that of the top quintile. An allowance reduction in an income tax system allows for an individual's personal allowance to be withdrawn, making a higher marginal tax for a limited band before returning to the underlying rate. In the UK, there is an effective 60% band at £100,000, which returns to 40% at £120,000. Non-uniform excise taxation based on everyday essentials like food ( fat tax, salt tax ), transport ( fuel tax, fare hikes for public transport), energy ( carbon tax) and housing ( council tax, window tax) is frequently regressive on income. The income elasticity of demand of food, for example, is usually less than 1 (inelastic) ( see Engel's law) and therefore as a household's income rises, the tax collected on the food remains almost the same. Therefore, as a proportion of available expenditure, the relative tax burden falls more heavily on households with lower incomes. Some governments offer rebates to households with lower incomes, ostensibly in an effort to mitigate the regressive nature of these taxes. A related concept exists where production and importation of essential goods are strictly controlled, such as milk, eggs, cheese and poultry under Canada's supply management system, the result being that the products will sell for a higher price than they would under a free market system. The difference in price is often criticized for being a "regressive tax" even though such products are generally not taxed directly. Payroll taxes, such as FICA and Unemployment Insurance in the United States, and consumption taxes such as Value Added Tax and sales taxes are regressive in that they both raise prices of purchased goods.