Regressive Taxes

Definition

Regressive taxes are taxes that take a larger percentage of income from low-income individuals compared to high-income individuals. In other words, as income decreases, the tax burden increases disproportionately.

Analogy

Imagine you and your friend both buy a $10 pizza. However, instead of splitting the cost equally, your friend pays only $2 while you have to pay $8. This is like regressive taxes because it takes a larger portion of your income compared to your friend's income.

Related terms

Flat Tax: A flat tax is a type of tax where everyone pays the same percentage regardless of their income. It is considered proportional because it does not change based on income level.

Proportional Taxes: Proportional taxes are also known as flat taxes. They require all taxpayers to pay the same percentage of their income in taxes, regardless of their earnings.

Progressive Taxes: Progressive taxes are the opposite of regressive taxes. They take a larger percentage of income from high-income individuals compared to low-income individuals.