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Home » Regressive Tax
 

Regressive Tax
In Regressive Tax system the rate of tax decreases with an increase in the income. The Regressive Tax is just the opposite of Progressive tax according to which the rate of tax increases with increase in income. Regressive Tax is a form of taxation in which the proportion paid is related to the income of an individual or an organization and the rate of tax decreases when the income increases. Regressive Tax is not favorable for the low-income people as Regressive Tax takes away a big percentage from the income of people who earn low.

Under this tax the high-income people will lose less portion of income in comparison to the low-income people. The most common example of regressive tax is gas tax and cigarette tax. The other places where regressive tax is levied include, taxes on alcohol, tobacco, jewelry, gasoline, perfume, travel, etc. In cases where the effective tax rate decreases with an increase of the amount to which it has been levied we can call it Regressive Tax. In case of regressive tax the lower income citizens have to pay a larger share of their income in comparison to the wealthier people. True regressive taxes are not generally levied on income. The regressive tax is imposed in case of the application of user fees. The user fees including fees for licenses, tolls for roads, fees for admission to parks and museums, parking fees and fees for bridges, and tunnels are levied according to regressive tax.

Tax is levied by the government and it is collected by the government agency. Tax is a financial charge imposed by the government, which help in supporting the government. Tax is not a donation or any kind of voluntary contribution. It is imposed on an individual or any other entity by the government and the non-payment or partial payment of which can make one suffering the criminal penalties. Tax or Taxation is imposed on income, selling and purchasing etc. Taxes are also taken in the form of toll, tribute, impost, duty, subsidy, excise, custom, aid etc.

The different forms of tax include, Progressive Tax, Regressive Tax and Proportional Tax. In progressive tax the tax rate increases with increase in the amount of income. In Proportional Tax the tax rate remains constant and does not show any progression. On Regressive Tax which is just the opposite of Progressive Tax, the tax rate decreases with increase in the amount to which the tax has been imposed. The percentage of tax is related to income or consumption. The rate at which the tax has be paid progresses from low to high, from high to low, or proportionally.

Regressive Tax is not good for the poor people as it takes away a higher percentage of income form the lower income citizens in comparison to the amount it takes away from the higher income citizens. The sales tax levied on the consumption items is one kind of regressive tax. According to the regressive tax with increase of the amount to which the tax has been levied, the tax rate decreases. According to regressive tax the less you earn, the higher the tax rate becomes. Sales tax is a typical example of regressive tax.