Progressive vs. Regressive Tax

Progressive and regressive taxes are defined by the percentage of income that individuals must spend paying the tax.

Progressive Taxes

Progressive taxes make individuals with a larger income spend a larger percentage of their income paying the tax.

Regressive Taxes

Regressive taxes are those which take an equal or greater percentage from those with lower incomes as opposed to those with higher incomes.

Rational

Progressive taxes are defended because people with smaller incomes must spend a larger percentage of their income on basic necessities so they cannot afford to pay as much.

Examples

The U.S. federal income tax is a progressive tax because it charges a higher percentage rate as your income increases. The sales tax is a regressive tax because the expense represents a larger percentage of poorer individual's incomes.

Fun Fact

In 1941, President Roosevelt signed an executive order instituting the most progressive tax in American history: a 100 percent income tax on incomes over $100,000. However, this was quickly overturned by Congress.

References

• Tax Policy Special Report
• Progressive and Regressive Taxation in the United States
• Ask This