Progressive and Regressive Taxes

A progressive tax is defined as a tax whose rate increases as the payer's income increases. That is, individuals who earn high incomes have a greater proportion of their incomes taken to pay the tax.

A regressive tax, on the other hand, is one whose rate increases as the payer's income decreases.

I'm beginning to suspect these terms were invented merely to make the U.S.' income tax appear more attractive.

Income tax is the only tax in the U.S. whose rate is tied directly to income. It is a progressive tax, according to the definition above; individuals and families with high incomes are taxed at a higher rate than individuals and families with low incomes.

Other taxes like sales tax are often called regressive taxes in order to make them compare poorly with income tax in terms of their "fairness". The rationale is that individuals or families at the low end of the income spectrum spend a higher proportion of their income than those at the high end. Combined with the fact that sales tax is tied to consumption rather than income, this leads some to the conclusion that low-income individuals and families pay a greater proportion of their incomes in sales taxes, therefore sales tax is regressive. You're supposed to read "regressive" as "unfair".

There are problems with the way "progressive" and "regressive" are used to describe tax structures.


Chuck Taylor -- (Copyright) -- (Contact)