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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: 5. Reduces a ‘Brain Drain’
When tax rates are more progressive, they can result in a loss of talent, also known as ‘brain drain’. This is where skilled professionals leave the country to find work elsewhere. By implementing a progressive system that taxes the rich at a higher rate provides an incentive for highly skilled professionals to move elsewhere. For instance, someone who has worked 10 years to become a surgeon earning $150,000 a year may face a marginal tax rate of 50 percent. All that work and effort, only for half their income to be taken away. As a result, they may look to other nations that provide a more regressive tax system that is objectively fairer. Disadvantages of Regressive Tax
1. Inequality
A regressive tax imposes a higher tax burden on those with lower incomes than those at higher incomes. Therefore, it creates a downwards pressure on the number of local income households can save.