Why is Sales Tax Considered a Regressive Tax? (Infographic)

Ever heard the term "regressive tax"? Maybe not. But it refers to a tax that is unfairly imposed more strongly on lower income families. Sales tax is regressive. Why? Because people who earn less pay a larger percentage of their salary in the form of sales tax, as compared to those who earn more.

In fact, based on percentage of salary, people in the lowest bracket pay more than DOUBLE what the top 1% pay.

Compare that to income tax, where (not counting deductions), the rich pay a higher percentage than the poor. Income tax is called a "progressive tax", because the burden falls more strongly on those who earn more.

You may wonder if there’s a middle ground. There is – it’s called a "proportional tax". That’s where everyone pays the same percentage of what they earn. In other words, a flat tax.

For a more in-depth look, see our post Is Sales Tax Fair?, published in 2016. It still applies today.

We’ve made an infographic below to help you understand what a regressive tax is, the burden it carries, and which states are the most regressive. (Hint: avoid Washington and Florida!)

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Facts to Tweet

1. The top 1% of earners pay just 5.4% of their salary in sales tax, while the lowest bracket pays 10.9%. [tweet this]
2. Washington, Florida, and Texas have the most regressive tax systems among all states. [tweet this]
3. Exemptions on basic necessities, such as groceries and medication, makes sales tax less regressive. [tweet this]

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Filed Under: Understanding Sales Tax