This is a guide to Regressive Tax Examples. Though income tax is based on the progressive tax system in most developed and developing nations, taxes like sales tax, sin taxes, property taxes, etc., are all based on regressive taxation schemes. Most of the indirect taxes fall under the purview of regressive tax. However, they do exist in every economy or nation. Regressive taxes cast harsher burdens on poor or low-earners. The tax amount would be $4.35 per pack, which would be paid by both rich and poor uniformly irrespective of their income level hence, the tax is regressive. What shall be the amount of regressive tax in this case? These taxes are charged at a fixed amount, say $4.35 of excise tax per pack of 20 cigarettes. In this last example, consider sin taxes. We can see that the same amount of property tax is costing Robert at the rate of 25% and John at the rate of 36% due to differences in their income level. Calculate the impact of fee payment on both families’ incomes. The first family’s monthly income is $5,000, and the second family’s income is $ 3,000. Two families with 3 members each planned to visit the city museum at the weekend. Let us take an example of the fees levied by the government. Price of the clothingĪnalyze whether the tax rate is regressive or not.įrom the above calculation, it is evident that though both the friends are paying the same tax amount, the sales tax of $112 is casting more burden on Tom than Sam. Sam earns $6,000 in a month, while Tom earns $4,000 in a month. The price of the clothing item was $800 the sales tax rate was 14%. Two friends, Sam and Tom, both went to the clothing store and bought the same piece of clothing for each of them. Now that we have understood the concept of the regressive taxation system and looked at a few examples of regressive taxes let us look at the calculation part of these taxes.
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