Which of the following best describes a regressive tax?

Which of the following best describes a regressive tax?

A. A tax that takes a fixed percentage of income regardless of the taxpayer’s level of income.

B. A tax that takes a larger share of the income of high-income taxpayers than of low-income taxpayers.

C. A tax that takes a higher percentage of income as income rises.

D. A tax whose rate rises less than in proportion to income.

Answer: D. A tax whose rate rises less than in proportion to income.

A regressive tax is a type of tax whose normal or average rate falls with increasing income. Stated succinctly, the regressive taxes collect a lesser percentage from rich citizens as compared to underprivileged averages. This causes the problem of an unfair distribution where tax burden becomes excessive for low income earners.

For instance, there is regressive type of taxation such as sales tax where it charges all people equally regardless of their levels income. Because sales taxes depend on spending, they take up a higher proportion of low-income consumers’ incomes than those of high- income earners. On the same note, taxes on essentials such as food and drugs are also regressive since they carry a significant burden to poor households.

Unlike the progressive taxes where tax rates increases with income, regressive taxation persist in opposites to it. Progressive taxes work to make sure that all kinds of people pay the same amount in terms of tax. Regressive taxes act in the opposite manner, where under a regressive tax system; it is only fair for the rich to pay less as an effective rate than what will be paid by the poor . This makes definition D the optimal way to define of a regressive tax.