Progressive Taxation, Flat Tax, Proportional
Regressive Taxation structure requires the more well-off to pay a lower percentage of their income
(or wealth) in tax than a less well-off citizen. Sales tax and the federal goods and
services tax (GST) are of this type as these taxes remain constant regardless of one's
The opposite of regressive taxation is progressive taxation, where taxation
structure progressively increases the percentage of a citizen's income (or wealth) which
is paid in tax as income (or wealth) increases.
The consequence is that
the more well-off citizen pays a smaller percentage of their income to cover the tax on a
new refrigerator than does a less well-off person.
There is a widespread view that strong reliance on
regressive taxes was conducive to building and maintaining large tax/welfare
states? The argument is that of the alleged superiority of regressive taxes
with respect to states revenue-raising capacity.
An example of a regressive tax is sales tax while an
example of a progressive tax is income tax.
Regressive taxation does raise political issues but is
rooted in mathematics rather than political platforms. The basic difference between the
two lies in the way in which the two types of taxation affect individuals in different
income levels. The regressive tax places a heavier tax burden on the poor while the
progressive tax places higher taxes on the rich. With progressive taxation, the more money
an individual makes, the more taxes that individual incurs. With regressive taxation, the
less money an individual makes the more taxes they incur.
Taxation and the Welfare State: Path Dependence and Policy Diffusion (Cambridge Studies in
Comparative Politics) by Junko Kato
"Too few political scientists have seriously examined the politics of taxation and
the role it has in the political economy of modern states. Junko Kato's Regressive
Taxation and the Welfare State bridges a major gap in understanding of the financing of
the modern state. Her intriguing argument challenges the naive notion that progressive
states must be financed through progressive taxes and in doing so, it makes an important
contribution to the policy debate across the OECD." Sven Steinmo, University of
"Recent theories of globalization have presented us
with a very strong argument, namely that economic integration forces modern welfare states
to converge. In this truly comparative and well-researched book, Junko Kato delivers an
intriguing result. It is a genuinely counter-intuitive, yet very convincing argument about
the importance of the institutional foundation of the taxation side of welfare states. In
this, Kato successfully challenges several well-established theories in comparative
politics. The puzzle she portrays and explains is theoretically important for our
understanding of the increasing variation in size between modern welfare states." Bo
Rothstein, Goteborg University
"Overall, Kato provides a compelling mix of quantitative and qualitative data to
equip the reader with some useful tools for considering what is at stake in the ongoing
debate over the future of welfare state funding." Journal of Sociology and Social
Political economists have viewed large public expenditures as a product of leftist
government and the expression of a stronger representation of labor interest. The
formation of governments' funding bases is a topic that has not been thoroughly explored,
and this book sheds important new light on the issue of taxes and welfare. Beginning with
a clarification of the development of postwar tax policies in industrial democracies,
Junko Kato finds that the differentiation of tax revenue structure is path dependent upon
the shift to regressive taxation. Kato challenges the conventional belief that progressive
taxation leads to large public expenditures in mature welfare states.
Excerpts from Kato, Junko. 2003. Regressive Taxation and
the Welfare State: Path Dependence and Policy Diffusion. New York: Cambridge University
Katos general argument is that a revenue shift to regressive taxes makes it
politically easier to maintain a large public sector, and hence that a mature
welfare state is closely connected to a larger reliance on regressive taxation.
In addition to the lower visibility of (some) regressive taxes and the lower tax burden on
capital induced by them, she also highlights flat tax rates and earmarking for social
programs as important advantages.
Kato qualifies the general argument with a subsidiary argument about path dependence: only
countries that implemented regressive taxes (most notably value-added taxes)
rather early, experienced the positive causal effect of a regressive tax mix on its
revenue-raising capacity. After the 1980s, so the argument goes, increased public
knowledge and suspicion about this effect prevented the regressive revenue
machines from displaying their full potential.
I reject the implicit assumption that strong reliance on regressive types of taxes is the
only way to keep the capital tax burden moderate.
"Addiction and regressive taxation
You're paying tax on everything . . . and to claim that tax off the smokers is quite bad .
. . There's people out there that are on crap money with the dole, hooked on fags. They've
got to buy fags and they end up there's nothing left for them or their kids' dinner or
that, because it's all got to go on the fags . . . There's enough smokers that they could
make a healthy whack, they don't need to be greedy . . . and it's not all going back in to
Well I mean considering the fact that all the money the government's . . . putting on
fags, if that money was solely to go back in to the health care area, fair do's, but you
know it doesn't". - "They're doing people a service" qualitative study of
smoking, smuggling, and social deprivation - Susan Wiltshire, research fellow a, Angus
Bancroft, lecturer a, Amanda Amos, senior lecturer a, Odette Parry, senior research
fellow. - bmj.com/cgi/content/full/323/7306/203