Question

vWhich of the following is an example of a regressive tax?


Multiple Choice

Federal income tax.


Sales tax.


State and local taxes levied on property.


Social Security tax.

Answer 1

A regressive tax is one where the tax rate decreases as the amount of income increases, meaning that lower-income individuals pay a higher percentage of their income compared to higher-income individuals.

Among the options provided:

1. **Federal income tax** - This is a progressive tax, as it takes a larger percentage from higher-income earners.

2. **Sales tax** - This is a regressive tax because everyone pays the same rate regardless of income, meaning lower-income individuals spend a larger portion of their income on sales tax compared to higher-income individuals.

3. **State and local taxes levied on property** - This can vary; it is typically considered more of a flat tax, but it may be regressive in practice depending on other factors.

4. **Social Security tax** - This is generally considered a regressive tax, as it is a flat rate up to a certain income cap, making it take a larger percentage of lower incomes.

Based on this analysis, the best answer is **Sales tax.**