A regressive tax system is one where the tax burden takes a higher percentage of income from low-income households than from high-income households. Common examples of regressive taxes include sales taxes, excise taxes, property taxes, and payroll taxes. These disproportionately affect lower-income earners because they spend a larger proportion of their income on taxable goods.
The individual and corporate income taxes and the estate tax are progressive. By contrast, excise taxes are regressive and payroll taxes for Social Security and Medicare are regressive at the top of the income distribution (see figure 2).
regressive tax—A tax that takes a larger percentage of income from low-income groups than from high-income groups. vertical equity—The concept that people in different income groups should pay different.
It's highly likely you pay a version of each – progressive for federal income tax, regressive tax on purchasing goods, and proportional for occupational taxes – so it's important to understand how each system works, and how they interact with social and economic issues.
A progressive tax system might, for example, tax low-income taxpayers at 10 percent, middle-income taxpayers at 15 percent and high-income taxpayers at 30 percent. The U.S. federal income tax is based on the progressive tax system.
Though true regressive taxes are not used as income taxes, they are used as taxes on tobacco, alcohol, gasoline, jewelry, perfume, and travel. User fees often are considered regressive because they take a larger percentage of income from low-income groups than from high-income groups.
But in fact, as noted in a new study, Canada's tax system is already among the most “progressive” in the industrialized world—meaning the tax system places a relatively larger burden on successful high-earning individuals compared to most other developed countries.
Although individuals are taxed at the same rate, flat taxes can be considered regressive because a larger portion of income is taken from those with lower incomes.
Close Because the tax burden (expressed as a percent of wages) decreases as wages increase beyond the wage cap, Social Security taxes can be considered regressive.
Transcript
A great example of a regressive tax is the 5% Goods and Services Tax (GST). For example, say a doctor earns $175,000 annually and a retail worker earns $30,000 annually. They both purchase a laptop for $1,000, and are charged $50 GST ($1,000 X 5%).
Tariffs are a regressive way to raise revenue. If low-income households consume more of their income and spend more on goods (affected by tariffs) than services (less so), tariffs are regressive because they force those with lower incomes to pay out a higher share of their income than higher-income households.
The correct option is a): Regressive taxes place a higher burden on people who earn less compared to wealthier taxpayers. In regressive taxes, the government collects a higher level of taxes from the low-income earners and a comparatively lower level of taxes from the high-income earners.
A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, so that the average tax rate exceeds the marginal tax rate.
While all 50 states once had estate taxes, only about one-third do today. They mainly affect wealthy people. Since other state and local taxes tend to be regressive, estate and inheritance taxes make tax systems fairer.
Flat, regressive, and progressive tax are the three primary types of tax systems used by governments. Different types of tax systems are used by different governments, with regressive taxes being more common at the state level.
Contributions to Social Security are not linked to how much money you make; once someone reaches an income of $176,100 in 2025, they stop paying in. This means a millionaire's effective tax rate is less than 1 percent — and they aren't required to pay anything for their unearned investment income.
State consumption tax structures are significantly more regressive than income tax or even property tax, which is broadly regressive. Nationally, the poor pay about 7 percent of their income in consumption taxes, compared with 0.8 percent for the wealthy and 4.7 percent for the middle-class.
Progressive taxes take more from those able to pay more. Because this method is based on the ability to pay, it is considered the fairest means of taxation. People with higher incomes pay larger amounts of tax because their taxable income is larger.
In the United States, payroll tax is actually not a flat tax. It's regressive. Only the first $176,100 of wages are taxed and everything above that is untaxed.
It is a well-known feature of property tax data that assessments appear to be regressive – inexpensive houses tend to be overassessed relative to expensive houses (Sirmans et al., 2008).
In 2022, Canada was ranked 22nd out of the 38 OECD countries in terms of the tax-to-GDP ratio. 1. In this note, the country with the highest level or share is ranked first and the country with the lowest level or share is ranked 38th.
For a $70,000 income in Canada (using 2025 rates), you'll pay roughly $13,000 to $20,000 in total taxes (federal, provincial, CPP, EI), depending on your province, resulting in a take-home pay around $50,000-$59,000, with federal tax around 14.5% or 20.5% depending on the portion, plus provincial tax and deductions like CPP and EI.
Unemployment compensation generally is taxable. Inheritances, gifts, cash rebates, alimony payments (for divorce decrees finalized after 2018), child support payments, most healthcare benefits, welfare payments, and money that is reimbursed from qualifying adoptions are deemed nontaxable by the IRS.