Title: What is a Regressive Tax?
Headings: What is a Regressive Tax?
What is a Regressive Tax?
Robinhood Learn
🤔 Understanding regressive tax
Takeaway
Ready to start investing?
Sign up for Robinhood
Tell me more…
How do regressive taxes work?
What are some examples of regressive taxes?
Sales taxes
Property taxes
Sin taxes
User fees
Which places have regressive taxes?
What are the pros and cons of regressive taxes?
Pros:
Cons:
What is the difference between a regressive tax vs. a progressive tax vs. a proportional tax?
Ready to start investing?
Sign up for Robinhood
You May Also Like

Content: In the United States and most other countries, income taxes are intended to be progressive — Higher earners pay a more significant percentage of their income in taxes. But consumption taxes, meaning those you pay based on things you buy, tend to be regressive across the board. In the United States, these taxes include sales and excise taxes. In Western Europe, the primary regressive tax is their value-added tax (VAT). We don’t have VAT in the United States, but in Europe, they use VAT to charge a consumption tax on products at each step of the supply chain when any value is added. When you account for both the progressive and regressive taxes in the major Western countries, the United States has a particularly progressive tax system. But the tax structure also varies by state, which can look far more regressive at local levels. State and local taxes often result in low-income earners paying a significantly higher percentage of their income in taxes. This trend is especially true in states that don’t have state income taxes, and instead rely more heavily on regressive taxes like sales and property taxes. The three most regressive tax states in the country are Washington, Texas, and Florida — None of these states have a state income tax (meaning states rely on sales and property taxes), and the poorest in the state pay 10% to 15% more of their income in taxes than the richest.