Economics Part B

Table of Contents

Regressive tax

Understanding What is Regressive tax

A tax the rate of which goes down as income increases. Example: the television license fee imposed as a fixed amount of approximately $600 per year for all households in the economy.

The fee represents 1% for a person earning $60,000 per year and 0.1% for a person earning $600,000.

Regressive taxes increase income differentials in the economy.