Difference between revisions of "Regressive tax"
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| − | A '''regressive tax''' is when everyone | + | A '''regressive tax''' is when everyone is taxed a fixed dollar amount, or fixed percentage such as sales tax. Essentially, a regressive tax causes those earning lower incomes to pay a greater percentage of their income. This acts as an incentive to force those earning lower incomes to work to earn higher incomes, thus reducing their effective [[tax rate]]. |
[[Category:Economics]] | [[Category:Economics]] | ||
Revision as of 17:40, November 16, 2009
A regressive tax is when everyone is taxed a fixed dollar amount, or fixed percentage such as sales tax. Essentially, a regressive tax causes those earning lower incomes to pay a greater percentage of their income. This acts as an incentive to force those earning lower incomes to work to earn higher incomes, thus reducing their effective tax rate.