Difference between revisions of "Regressive tax"
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| − | A '''regressive tax''' is | + | A '''regressive tax''' is a form of taxation where an individual's effective [[tax rate]] ''decreases'' as their amount of income ''increases''. Essentially, a regressive tax causes those earning lower incomes to pay a greater percentage of their income in taxes. In the United States, [[sales tax]]es and [[payroll taxes]] ([[Social Security]] and [[Medicare]]) are the two most common examples of regressive taxes. Supporters of regressive tax regimens claim they act as an incentive to force those earning lower incomes to work to earn higher incomes, thus reducing their effective tax rate. |
==See Also== | ==See Also== | ||
Revision as of 04:45, February 18, 2013
A regressive tax is a form of taxation where an individual's effective tax rate decreases as their amount of income increases. Essentially, a regressive tax causes those earning lower incomes to pay a greater percentage of their income in taxes. In the United States, sales taxes and payroll taxes (Social Security and Medicare) are the two most common examples of regressive taxes. Supporters of regressive tax regimens claim they act as an incentive to force those earning lower incomes to work to earn higher incomes, thus reducing their effective tax rate.