Regressive vs Progressive tax examples explained

In this FAQ article, let us understand about Regressive vs Progressive tax with real examples. You must know the formula to calculate the average tax rate before knowing the differences between Regressive tax and Progressive tax. Average tax rate = (tax paid)/(personal income).

Regressive vs Progressive tax

A regressive tax is added so that the average tax rate will decrease indirectly proportional to the taxation amount. Compared to the rich class people, the regressive tax is a huge burden to the middle class and poor people.


So, what is Progressive tax? Progressive tax is direct opposite to the Regressive tax, in which the average tax rate increases proportionally with the taxation amount. As a result low income people pay lower tax and high income people pay higher tax to the government. Below we explain with real life examples to understand what Regressive tax is and what Progressive tax is in the United States of America.

Regressive tax examples

  • Examples of Regressive tax in United States are SS Social Security tax. If you look at the tax paid amounts of the high income to the low income people, then the SSN benefits are Progressive in nature.
  • Non-uniform excise taxation is another good example of tax being Regressive to income.
  • Other examples include Lump-sum tax and Poll taxes.

Progressive tax examples

  • Easy to understand examples of Progressive taxes are sales tax levied on luxury goods, wealth tax, and property tax etc.
  • Tax brackets according to the income range falls under the Progressive tax method. In the United States, income tax brackets range from 10% to 39.6%, while in Australia there is no income tax for the income slab till AUD $18,200.
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