Which tax takes a smaller share of income as income increases and may fall more heavily on lower-income individuals?

• A. Progressive tax
• B. Proportional tax
• C. Inflation rate
• D. Regressive tax

Answer: (D)

A regressive tax takes a smaller share of income as income increases and tends to fall more heavily on lower-income individuals. This happens because the tax is not scaled to ability to pay—often it’s a fixed amount or a uniform rate on consumption. For example, a sales tax applies the same rate to everyone, but poorer households must spend a larger portion of their limited income on taxed goods, so the burden relative to income is higher for them and shrinks as income grows. By contrast, a progressive tax raises the share paid as income rises, a proportional tax keeps the same share for all, and the inflation rate is not a tax at all.