Also found in: Legal.
regressive taxationa structure of TAXATION in which tax is levied at a decreasing rate as INCOME rises. This form of taxation takes a greater proportion of tax from the low-income taxpayer than from the high-income taxpayer. INDIRECT TAXES such as value-added tax or excise duty become regressive when taken as a proportion of total net income. For example, if an item costs £100 and value-added tax is 15%, then £15 in relation to £200 per week net pay (7 1/2 %) is greater than £15 to another person earning £600 per week net (21/2%). The burden of taxation is therefore proportionately greater on the less affluent members of society and cannot be considered an equitable tax. Compare PROGRESSIVE TAXATION, PROPORTIONAL TAXATION. See also ABILITY-TO-PAY PRINCIPLE OF TAXATION, INCIDENCE OF TAXATION, REDISTRIBUTION-OFINCOME PRINCIPLE OF TAXATION.
A tax burden that falls more heavily on those with low income. Contrast with progressive tax and proportional tax. Sales taxes are regressive taxes if imposed on all sales, because the straight percentage imposed on all sales takes away a higher percentage of a lowincome household's available income.Some states attempt to lessen the regressive effect of sales taxes by exempting purchases of food and medicine. In the following table, the low-income household spends almost 5 percent of its disposable income on sales taxes, because all income after paying for housing must go to buy things that are taxable.