Which term describes the tax burden that falls more heavily on low-income groups relative to high-income groups?

• A. Progressive Tax
• B. Regressive Tax
• C. Mutual Fund
• D. Savings

Answer: (B)

A regressive tax describes a burden that falls more heavily on low-income groups than on high-income groups. This happens when the tax takes a larger share of a poorer household’s income because it’s applied equally across all incomes or because expenditures subject to tax consume a bigger portion of the poorer household’s budget. For example, sales taxes apply at the same rate to everyone, so low-income individuals end up paying a larger fraction of their income in taxes since they spend a greater portion of what they earn on taxed goods. By contrast, a progressive tax charges higher rates on higher incomes, spreading the burden more toward wealthier earners. Mutual funds and savings are investment concepts, not tax-burden concepts. So the term that fits is regressive tax.