It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Regressive taxes tend to reduce the tax incidence of people with higher ability-to-pay, as they shift the incidence disproportionately to those with lower ability-to-pay. The opposite of a regressive tax is a progressive tax, where the marginal tax rate increases as the amount subject to taxation increases. In between is a flat or proportional tax, where the tax rate is fixed as the amount subject to taxation increases.
The term is frequently applied in reference to fixed taxes, where every person has to pay the same amount of money. The regressivity of a particular tax often depends on the propensity of the tax payers to engage in the taxed activity relative to their income. In other words, if the activity being taxed is more likely to be carried out by the poor and less likely to be carried out by the rich, then the tax may be considered regressive. To determine whether a tax is regressive, the income-elasticity of the good being taxed as well as the income-substitution effect must be considered.
Investor and multi-billionaire Warren Buffett has criticized the U.S. tax code as highly regressive, citing himself as anecdotal evidence: Buffett stated that with an income of over $46 million, he pays a tax rate of 17.7 percent, whereas his receptionist pays a tax rate of 30 percent.
Buffett's critique focuses on significantly lower tax rates applied to certain forms of investment income including capital gains. However, progressive or regressive taxation often must be considered as part of an overall system since tax codes have many interdependent variables.
Category:Taxation and redistribution Category:Tax incidence
bg:Регресивен данък da:Regressiv skat de:Degressiver Tarif fr:Impôt régressif it:Regressività lt:Regresinis mokestis nl:Degressieve belastingen pl:Podatek regresywny ru:Регрессивное налогообложение sv:Regressiv skattThis text is licensed under the Creative Commons CC-BY-SA License. This text was originally published on Wikipedia and was developed by the Wikipedia community.
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