Title: regressive tax | Definition, Examples, & Facts | Britannica
Headings: Regressive tax
Regressive tax
Regressive tax

Content: These are often called “ sin taxes .” Most economists agree that the regressivity or progressivity of any specific tax is of minor economic importance. What matters is the degree of progressivity of the tax system as a whole. This is why even economists who advocate a steeply progressive overall tax system might support a tax on gasoline as a way of reducing air pollution; if the gasoline tax is an efficient way of reducing air pollution, its modest contribution to overall regressivity can be easily offset by more progressive wage or income taxes. However, any regressivity stemming from broad-based consumption taxes —such as a general sales tax or a value-added tax —can be hard to offset if a government raises a large proportion of its total revenues through these taxes. Consumption taxes are generally considered to be regressive because studies have shown that wealthier people spend a smaller proportion of their incomes. ( A full analysis, however, must take into account any future consumption taxes that will ultimately be paid when the savings of the rich are eventually consumed.) To mitigate this perceived regressivity, consumption taxes are often levied at lower rates on goods perceived as necessities (such as food and clothing), while higher rates are levied on goods perceived as luxuries (such as jewelry and yachts). The Editors of Encyclopaedia Britannica This article was most recently revised and updated by Brian Duignan, Senior Editor.