A regressive tax system is one in which the average tax rate falls as an individual’s income rises, so lower-income earners pay a higher proportion of their income in tax than higher-income earners.

This effect arises because regressive taxes are typically fixed amounts or flat rates applied to consumption, which represent a larger share of income for those with lower earnings.

Example: A 13% sales tax on a $300 purchase yields $39 in tax for both individuals below:

• John (monthly income: $3,000): tax as 1.3% of income.
• Sam (monthly income: $4,000): tax as 0.975% of income.

Thus, the tax burden is heavier on the lower earner, confirming its regressive nature.