Sociology Index


Flat Tax, Proportional Taxation

Regressive Taxation structure requires the more well-off to pay a lower percentage of their income in tax than a less well-off citizen. Sales tax and the federal goods and services tax 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 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 a state's 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). 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 Colorado

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.
Kato's 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.

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. - Susan Wiltshire, Angus Bancroft, Amanda Amos, Odette Parry.