According to the U.S. Internal Revenue Service, an example of a regressive tax is a user fee, such as a business license. A regressive tax levies the same amount on each individual, but the proportionality of the tax affects those with a smaller income to a larger degree than those with higher incomes.
Other examples of a regressive tax include sales tax or property tax, according to the University of Texas. If the sales tax is, for example, seven percent for each person, a seven percent tax on a person with an income of $10,000 is a greater proportion of the overall income than it is for a person with an income of $100,000. A sales tax is thus a regressive tax which appears to be a fair tax only in statute. By the same logic, a “flat tax” is also a regressive tax, according to Auburn University’s Dr. Paul Johnson.
The opposite of a regressive tax is a progressive tax. According to the Library of Economics and Liberty, a progressive tax places a greater tax levy on higher incomes. The U.S. income tax structure is an example of a progressive tax. The higher an individual’s income, the greater the tax rate on that income.