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 Regressive Taxation as these taxes remain constant regardless of one's income.
The opposite of regressive taxation is progressive taxation. Regressive 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 of regressive taxation 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 Taxation was conducive to building and maintaining large tax/welfare states? The argument is that of the alleged superiority of Regressive Taxation with respect to states revenue-raising capacity. An example of a regressive taxation is sales tax while an example of a progressive taxation is income tax.
Regressive taxation does raise political issues but is rooted in mathematics rather than political platforms. The basic difference between the Regressive Taxation and Progressive Taxation 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.
Regressive Taxation and
the Welfare State: Path Dependence and Policy Diffusion (Cambridge Studies in Comparative
Politics) by Junko Kato
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.
Excerpts from Kato, Junko. 2003.
Regressive Taxation and the Welfare State: Path Dependence and Policy Diffusion. New York:
Cambridge University Press.
Addiction and regressive