Regressive Tax
Plain definition
A tax that takes a larger percentage of income from low-income earners than from high-income earners.
In economics
Most consumption and flat-amount taxes are regressive in effect because poorer households spend a larger share of income on taxed goods. Sales taxes, excise taxes on gasoline and tobacco, and flat fees all weigh more heavily on the poor, which is why policymakers sometimes exempt necessities like food.
Example
A 10% sales tax on groceries costs a family earning 6,000 on food) 300,000 (spending 1,200, but only 0.4% of income. Same tax, much heavier burden on the poorer family.
A regressive tax is confused with a progressive tax and with the dollar amount paid. Regressive describes the rate relative to income, not the total dollars: the rich family above paid more dollars (600) yet faced a lower effective rate, which is what makes the tax regressive.