Sociology Index

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REGRESSIVE 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. A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. Sales tax and the federal goods and services tax are Regressive Taxation as these taxes remain constant regardless of one's income. Regressive Taxation structure progressively increases the percentage of a citizen's income which is paid in tax as income, or wealth, increases. The opposite of regressive taxation is progressive taxation. A regressive tax at appears to be a fair way of taxing citizens because everyone, regardless of income level, pays the same dollar amount. On a closer look, it is easy to see that such a tax causes lower-income people to pay a larger share of their income than wealthier people pay. Regressive taxes are used as taxes on tobacco, alcohol, gasoline, jewelry, perfume, and travel. 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. Flat Tax structure has gained significant public support in North America.

In between Regressive Taxation and Progressive Taxation is Proportional Taxation, where the tax rate is fixed as the amount subject to taxation increases. 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.

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.

Progressive and Regressive Taxation in the United States: Who's Really Paying (and Not Paying) Their Fair Share?
Roach, Brian A.
Abstract: The political debate over recent reforms of the federal income tax in the United States has focused attention on the fairness of taxes. While the Bush administration claims its reforms make taxes fairer, critics counter that the majority of the tax cuts accrue to the wealthy. While the fairness of the federal income tax is an important issue, little attention has been paid to a more important issue: the fairness of the entire U.S. tax system. The federal income tax is one of the most progressive elements of the U.S. tax system; other taxes are regressive including sales and social insurance taxes. Analysis of any particular tax reform proposal is incomplete without consideration of its impact on the overall distribution of taxes. The current trend towards a less progressive federal income tax and more regressive state taxes suggests that in the foreseeable future the United States could have a tax system that is regressive overall. Roach, Brian A., 2003. "Progressive and Regressive Taxation in the United States: Who's Really Paying (and Not Paying) Their Fair Share?," Working Papers 15603, Tufts University, Global Development and Environment Institute. 

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.