Question

Explain what is meant by regressive tax. Why is the social security tax considered a regressive tax?

Answer 1

Regressive Taxation:

Regressive taxation means, a higher rate of tax is collected from Low income and low rate of tax is collected higher income people. Taxation rate deminishes when income increase and if income decreases a higher rate is collected.

There is a inverse relationship between income and taxation.

Through this system higher income people wil be benifited and creates burden to low income people.

Social security tax is considered as a regressive tax because a larger portion lower income peoples total income is with held compared to larger income people.