regressive tax

Regressive Tax

A tax that takes a larger percentage from the income of low-income people than the income of high-income people.

Investopedia Commentary

Some examples include gas tax and cigarette tax.

See also: Flat Tax, Income Tax, Progressive Tax

regressive tax

A tax that has a rate that declines as the amount to be taxed increases. In terms of income, federal and state taxation of cigarettes is regressive because low-income smokers pay a higher rate of taxation in terms of their income than high-income smokers do. A system of regressive taxation tends to free more funds for investment because high-income individuals tend to save a greater portion of their income. However, a regressive tax is often considered socially and politically unacceptable. Compare progressive tax.