Question

Why is the United States economy considered a regressive tax system? Please provide examples that support this evidence

Answer 1

Answer- In a regressive tax system people with lower income end up paying more part if their income as tax than the people with higher income. In other words as the income increases the burden if tax on a certain percentage of income decreases. USA is a very large and fast economy and has a high wage rate or per hour pay as compared to the other developed or developing countries.

USA places huge importance on the social security benefits and periodically makes an analysis of who has a house and who doesn’t, who can afford medicare benefits and who can’t etc. So by following the regressive approach in certain taxes the hovernment is able to figure out which people come under the social security benefits. This helps in better asministration of of such expenses.

There is one major advantage of following the regressive tax system which is that it makes the people the want to work harder and earn more income so that they have to pay less tax on the part of their income.

An example could be tax on cigarettes. If one purchases a single cigarette box the tax applied is much higher than what it have been applied had the person purchased a carton of cigarettes which usually contains 10 cigarette packs. It is also sometimes seen the more the sales more will be the siscount offered.