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.
None of the "regressive" taxes that are compared with the income tax are tied directly to income. Using inconsistent criteria for defining terms that are represented to be opposites hinders honest discussion.
Calling a tax on consumption "regressive" requires that one assume that an individual spends all of his income in ways that are subject to the tax. Otherwise, the reasoning that finds "regressive" taxes unfair gets even more farfetched.
When declaring "regressive" consumption-based taxes unfair in comparison with progressive taxes, proponents of progressive taxes overlook the fact that the EU, home of some of the most, erm, progressive societies in the world, is perfectly happy with its 17.5 percent VAT, an entirely consumption-based tax.
Just about any tax, including property, luxury, and inheritance taxes, can be declared "regressive" if the sample group is chosen carefully. Dishonest? Probably. But only because the use of the word "regressive" when applied to taxation has its own problems with accuracy.
Curiously enough in my community, many of those who are proponents of the income tax on the premise that a progressive tax is "more fair" are also proponents of a state-sponsored lottery, which of course tends to have the same effect on the different income categories as a "regressive" tax. Apparently some "regressive" taxes are less unfair than others.
Chuck Taylor --