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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: Simplicity
A lot of regressive taxes are also flat taxes but are regressive in the fact that they are disproportionately paid for by lower-income households. Yet they are very simple in their implementation. For instance, the sales tax is straightforward – a 5 percent tax on each and every item. By contrast, the progressive income tax has to be calculated to determine the bracket, how much is earnt on that additional income, and how much is charged because it comes from capital. It requires thousands of workers just to administer such a system, but a regressive flat tax is simple. 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.