Political Science Citizen Interactions Practice Test 2025 – Your All-In-One Guide to Mastering Citizen Engagement!

A regressive tax is one where the tax rate decreases as the income of the taxpayer increases. This means that lower-income individuals pay a higher percentage of their income compared to those with higher incomes. Sales tax is a prime example of a regressive tax because it is levied as a flat percentage on goods and services purchased, regardless of the buyer's income level. Hence, individuals with lower incomes spend a larger proportion of their income on these purchases, resulting in them effectively paying a higher tax rate relative to their income.

In contrast, a graduated income tax applies progressive rates, where higher earners pay a greater percentage of their income in taxes. Corporate taxes are based on the profits of corporations and do not directly affect individual tax rates in the same regressive manner. Capital gains tax, which taxes income from investments at different rates depending on how long the asset was held, also does not exhibit the characteristics of a regressive tax. Therefore, sales tax clearly fits the definition of a regressive tax as it disproportionately impacts lower-income individuals.