Question

Excise taxes on tobacco and alcohol and state sales taxes are often criticized for being regressive. Although everyone pays the same rate regardless of income, why might this be so?

   Excise taxes on tobacco and alcohol and state sales taxes are often criticized for being regressive. Although everyone pays the same rate regardless of income, why might this be so?

Principles of Macroeconomics

Principles of Macroeconomics

Steven A. Greenlaw,… 2nd Edition

Chapter 17, Problem 39

Instant Answer

Step 1

Regressive taxes are those that take a larger percentage of income from low-income earners than from high-income earners. It is the opposite of a progressive tax, which takes a larger percentage from high-income earners. Show more…

Show all steps

lock

Thanks for your feedback!

Excise taxes on tobacco and alcohol and state sales taxes are often criticized for being regressive. Although everyone pays the same rate regardless of income, why might this be so?

Play audio

Feedback

Powered by NumerAI

Labs

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

Key Concepts

Regressive Taxation

Regressive taxation refers to a tax system in which lower-income individuals end up paying a larger percentage of their income compared to higher-income individuals. This occurs because the tax is applied uniformly to goods or services, meaning that while everyone pays the same rate, the tax represents a bigger burden relative to the income of those with lower earnings.

Uniform Tax Rates and Income Distribution

Uniform tax rates, such as those applied to certain products and sales, do not adjust based on an individual's income. Consequently, since lower-income individuals spend a greater share of their limited income on taxed goods, these taxes consume a larger proportion of their overall earnings compared to high-income earners, thereby creating a regressive effect.

Recommended Videos

Ace is your personal tutor. It breaks down any question with clear steps so you can learn.

Start Using Ace

Continue solving this problem

Create a free account to:

View full step-by-step solution
Ask follow-up questions with Ace AI
Save progress and study later