ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Definition: Under this system of taxation, the tax rate diminishes as the taxable amount increases. In other words, there is an inverse relationship between the tax rate and taxable income. The rate of taxation decreases as the income of taxpayers increases.

Detailed explanation-2: -Sales and excise taxes are the most regressive element in most state and local tax systems. Sales taxes inevitably take a larger share of income from low-and middle-income families than from rich families because sales taxes are levied at a flat rate and spending as a share of income falls as income rises.

Detailed explanation-3: -Consequently, the chief examples of specific regressive taxes are those on goods whose consumption society wishes to discourage, such as tobacco, gasoline, and alcohol. These are often called “sin taxes.” Most economists agree that the regressivity or progressivity of any specific tax is of minor economic importance.

Detailed explanation-4: -Applying uniform tax on a large percentage of low income earners than on high income earners is known as regressive tax. Regressive tax imposes more burden on the poor than on the rich.

Detailed explanation-5: -Regressive taxes place more burden on low-income earners. They take a higher percentage of income on the poor than on high-income earners.