Glossary

Regressive tax

A tax that takes a larger share of income from low earners than from high earners.

Also called: regressive taxation

A regressive tax is one in which the effective burden, measured as a percentage of income, falls as income rises. A flat per-unit tax is often regressive because lower-income households spend a greater share of their income on taxable goods.

Common examples include sales taxes, excise taxes on gasoline, alcohol and tobacco, and some fees and property taxes. The Social Security payroll tax is also regressive in part because it applies only up to a wage cap, so earnings above the cap are not taxed. Other parts of the tax system, such as the income tax, are progressive, and the overall effect depends on the mix of taxes and spending.

Critics of regressive taxes argue that they put too much burden on those least able to pay. Supporters of consumption-based taxes, including many conservatives, point out that they tax what people take out of the economy and not what they put in through saving and investment, and that regressivity can be offset by rebates or exemptions, as in proposals for a national sales tax with a "prebate." Some economists measure burdens by lifetime income, under which consumption taxes look less regressive. Compare progressive tax and flat tax.

Last reviewed November 8, 2026

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Related terms

Progressive tax A tax whose rate rises as the taxpayer's income or wealth rises, so higher earners pay a larger share. Flat tax An income tax with one rate for everyone, usually paired with a large exemption and few deductions. Payroll tax A tax on wages that funds Social Security and Medicare, split between employers and employees. National sales tax A proposed federal tax on retail purchases that would replace income and payroll taxes, usually with a rebate for households. Value-added tax A consumption tax collected at each stage of production on the value added, widely used abroad but not in the United States.