![]() If you compare Mary and Julie in the example below, you’ll see that sales tax has a much larger negative effect on Mary than it does on Julie. We’ve made an infographic below to help you understand what a regressive tax is. It’s the same percentage of earnings.įor a more in-depth look, see our post Is Sales Tax Fair?, published in 2016. Note that this is the same percentage of what they spend – which is exactly how sales tax works. That’s where everyone pays the same percentage of what they earn. There is – it’s called a “proportional tax”. You may wonder if there’s a middle ground. Income tax is called a “progressive tax”, because the burden falls more strongly on those who earn more. ![]() Because everyone in a given area pays the same percentage of tax, it works out to be a larger portion of the overall income for people who earn less.Ĭompare that to income tax, where (not counting deductions), the rich pay a higher percentage than the poor. In fact, based on percentage of salary, people in the lowest bracket pay more than DOUBLE what the top 1% pay. ![]() Why? Because people who earn less pay a larger percentage of their salary in the form of sales tax, as compared to those who earn more. You may be wondering: is sales tax progressive or regressive? It refers to a tax that is unfairly imposed more strongly on lower income families. Have you ever heard the term “regressive tax”? Maybe not.
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