GST: A flat or regressive tax... (1 Viewer)

[dwh2427]

Yeh just in case, is the GST a flat or regressive tax? Its obviously a flat % however with lower earners spending a higher proportion of their income as compared to higher income earners it could be considered regressive.
Which one is it?
Thanks.

 

[numg]

You got it, its both
just make sure you justify why its acts like a regressive tax if you argue it that way, or menton why its flat.

 

[dwh2427]

yes....
however its hard to justify a multiple choice answer.
One must be a little more correct don't you think?

 

[Newbie]

i think its flat
my teacher says its regressive

but gst has nothing to do with income so.......hmm

 

[numg]

technically it would be a flat tax but essentially it acts as a regressive tax. the markers would probably be going both ways on that so i doubt it'll be a question in MC

 

[saves.the.day]

Originally posted by Newbie
i think its flat
my teacher says its regressive

but gst has nothing to do with income so.......hmm

But you think about it, by definition, regressive means that the MRT decreases as income increases. So say a 10% tax on a $1 stick of gum is $0.10 so to lower income earners, this is a greater proportion of their income than to a high income earner as this is a small proportion of their income.

In effect, you fulfil the definition, the marginal tax rate has decreased as you go up in income.

But you are all correct, it is both

 

[numg]

I thought it was cause lower income earners have a higher propensity to consume...ie to buy the necessites they need to survive could take like 70% of their income...with the GST its 77% of their income. On the other hand for a high income earner, the same amount of goods would be say 30% of income and with the tax it becomes 33%. I think its regressive because it takes a higher proportion of the low income earners wages.

 

[dwh2427]

So the GST is a flat tax with a regressive nature.
Thinking about it...I think the only way they could ask a MC question is by asking specificallly how it affects income earners...then it would be regressive.

 

[ssj_goku]

Is the question referring to an isolated instance of GST tax or the total GST paid by an individual?

 

[timmii]

It's regressive. Taxes are described with reference to income. So while the GST is a flat *rate* with regard to the price of goods and services, it represents a declining proportion of income.

 

[eeyore]

I'd say it's regressive (if it was in the mc section)