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Regressive Tax

Taxes can be classified as regressive, proportionate, and progressive. A tax is regressive if it requires those with lower income or wealth to pay a higher fraction of their income in tax. A proportionate tax takes the same fraction of each individual’s income. A progressive tax requires those with higher income to pay a larger fraction of their income in tax.

A sales tax, which can be levied either at the point of purchase or at various points in the product or sales process, is generally regressive. Sales taxes are also sometimes called commodity or excise taxes. Sales taxes are a fixed percentage tax on the cost of goods purchased. Yet such taxes are in practice regressive, because those with lower incomes use a larger portion ...

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