system in which the percentage of income paid declines as income rises. Under a regressive system, as income rises from $15,000 to $100,000, the tax rate would fall from 20% to 10%, for example. In this sense, a regressive tax is the opposite of a progressive tax. The term is also used generally to refer to any tax system that favors the rich at the expense of the poor. The general sales tax with its fixed rate is considered regressive, because lower income groups tend to spend a higher percentage of their incomes on goods and services than higher income groups.
tax that takes a higher percentage of the earnings of a low-income family than of those of a high-income family. A sales tax on food is considered regressive because low-income people pay the same amount of tax on a loaf of bread, for example, as do highincome people.
- system of taxation in which tax rates decline as the tax base rises. For example, a system that taxed values of $1,000 to $5,000 at 5%, $5,000 to $10,000 at 4% and so on would be regressive. A regressive tax is the opposite of a progressive tax.
- tax system that results in a higher tax for the poor than for the rich, in terms of percentage of income. In this sense, a sales tax is regressive even though the same rate is applied to all sales, because people with lower incomes tend to spend most of their incomes on goods and services. Similarly, payroll taxes are regressive because they are borne largely by wage earners and not by higher income groups. Local property taxes also tend to be regressive because poorer people spend more of their incomes on housing costs, which are directly affected by property taxes. See also flat tax.
