Regressive tax Guide, Meaning , Facts, Information and Description

A regressive tax is a tax which takes a larger percentage of income from people whose income is low. A tax which places proportionately more of a burden on those with lower incomes. Regressive taxes, as opposed to progressive taxes, are more burdensome on lower-income individuals than on higher-income individuals and corporations.

Advocacy

Supply-side economics advocated regressive taxes as a means to solve the problem of stagflation. There is considerable debate as to whether regressive taxes are such a solution, in practice and in theory. It should be pointed out that the highest tax bracket in the United States before Reagan was 70%, a percentage viewed by some as being too high, and thus straining the main arguments for progressive taxes. Opponents of this high tax rate for the rich (or high tax rates for the rich in general) argue that it lowers the incentive to work and innovate, while proponents argue that since the rich are still richer than everyone else, their incentive is left intact (or, alternatively, they may argue that most of the rich no longer work and innovate once they reach a certain level of wealth). Finally, it should also be pointed out that currently (as of 2004) the highest tax bracket in the United States is 35%, one of the lowest in the world.

Detractors

It is natural to expect that some of those individuals and organizations which benefit most directly and most tangibly from a regressive tax (namely wealthy individuals and corporations), will advocate such a tax regardless of the main stream positions for and against. Therefore it is suggested that regressive taxes are the darlings of the wealthy and of special interest groups. In fact there are numerous lobbies and political groups devoted to regressive taxes.

Examples of Regressive Taxes

• Payroll tax, particularly the Social Security payroll tax in the US. Its rate is 12.4% on income under $87,000 (only half of that is visible to wage-earners, but all of it must be paid by the self-employed) but 0% on higher incomes.
• Value-added tax or other sales tax on groceries. Since food is a basic necessity, it takes up a much higher percentage of the budget of a person or family with a lower income.
• Property tax. Since housing is a basic necessity and property tax contributes directly to the cost of owning or renting housing, it takes up a much higher percentage of the budget of a person or family with a lower income.
• The poll tax which is a fixed tax for each person: since each person pays the same amount, it is a lower proportion for people with higher incomes.

This is an Article on Regressive tax. Page Contains Information, Facts Details or Explanation Guide About Regressive tax

	Web www.E-paranoids.com