Regressive taxation includes taxes on alcohol, cigarettes and VAT.
Definition of regressive taxes - takes a higher % of income from those on low incomes.
Arguments for regressive taxes.
cigarette taxes help overcome market failure
indirect taxes don't affect work incentives like income tax - non distortionary and therefore are efficient
Arguments against regressive taxes.
Increases inequality. Poor have a reduction in discretionary income
Increasing income tax in UK would have little impact on reducing work incentives.
More on regressive taxation
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