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: -regressive tax, tax that imposes a smaller burden (relative to resources) on those who are wealthier. Its opposite, a progressive tax, imposes a larger burden on the wealthy. A change to any tax code that renders it less progressive is also referred to as regressive.

Detailed explanation-3: -Taxes like sales tax, fuel tax, excise tax, social security payroll fall under the purview of regressive taxes.

Detailed explanation-4: -A progressive tax is characterized by a more than proportional rise in the tax liability relative to the increase in income, and a regressive tax is characterized by a less than proportional rise in the relative burden.

Detailed explanation-5: -Regressive Nature of an Indirect Tax They are essentially fees that are levied equally upon taxpayers, no matter their income, so rich or poor, everyone has to pay them. For example, the import duty on a television from Japan will be the same amount, no matter the income of the consumer purchasing the television.