REGRESSIVE TAX

tax levied at a rate that decreases as its base increases. Regressivity is considered undesirable in taxation because it forces poorer persons to pay a greater percentage of their income in tax than wealthier persons. Despite efforts to avoid regressivity, certain taxes, especially proportional taxes, tend to become regressive in practice. Consumption tax and sales tax, for instance, are usually considered regressive because of their set rate structures. The percentage of tax paid to income level will rise as income drops. Tobacco, gasoline, and liquor sales taxes, all major sources of tax revenue, are considered the most heavily regressive taxes. Upper income groups can also avoid sales tax by buying merchandise wholesale, thus making a regressive sales tax even more regressive. In an effort to mitigate this regressivity, a number of states in the United States, for example, exempted from sales tax medicine and/or food to be consumed off the premises. Property tax is often considered regressive because poorer individuals tend to spend a larger portion of their income on housing and are taxed proportionately, while wealthier individuals spend a lesser portion of their income in this way and therefore pay a lower percentage rate. It is also common for property assessors to underevaluate higher-priced property more than they do lower-priced property, thus increasing regressivity.