In contrast property and sales taxes tend to be regressive in nature by virtue of the fact that they make everybody pay the same flat rate.īut if everybody pays the same flat rate shouldn't such taxes be considered neutral, neither progressive nor regressive? The key to understanding these concepts is to focus exclusively on the percentage of one's income that is paid for each type of tax. Most income tax schemes are progressive because they usually rely on graduated rates which increase the percentage of income paid as income rises. The impact of regressive taxes is exactly the opposite: they require those with lower incomes to pay a higher percentage of their income on such taxes. Progressive taxes require those with higher incomes to pay a higher percentage of their income on those particular taxes. All tax schemes can be characterized as either progressive or regressive.
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