Taxes Disproportionally Affects Lower Income Families

Sales taxes, which are charged on the purchase of goods and services, are a typical source of income for all levels of government. Although a sales tax may seem like a reasonable and practical way to earn money, it really has a disproportionately negative impact on lower-income families.

The fact that sales taxes are regressive—that is, they take a bigger percentage of revenue from people with lower incomes—is one of the primary causes of this. For instance, a family spending $3,000 on taxable products and services would pay $3000 a year in sales tax, or 6% of their income, if they make $50,000 a year. On the other hand, a family spending the same amount and making $80,000 annually would only pay 3.75% in sales tax of their income.

The fact that lower income households frequently spend a larger percentage of their income on basics like food, clothing, and housing, which are frequently subject to sales tax, is another aspect that contributes to the disproportionate impact of sales tax on these families. Additionally, it is more difficult for these families to avoid paying sales tax because they are less likely to have access to tax-free buying choices like internet merchants or sizable discount stores.

The impact is further amplified by the fact that lower income families are more likely to reside in states with higher rates of sales tax. The budgets of lower income families are significantly strained by some states' up to 10% sales tax rates.

In addition to other taxes like property taxes, income taxes, and gas taxes, sales tax is just one of many taxes that lower-income families must pay. As a result, the entire tax burden can be extremely high. Budgetary stress from sales tax is disproportionately felt by lower income people.

Flat Tax Model

Often times when viewing a flat tax the 15% number is used. Assuming the same data applies here is a chart of how families will be affected by the flat tax. 

flat tax model

Flat tax model leaves both person 1 and 2 in a place with not much room for unexpected expenditures. So the flat tax isn't a perfect solution to the problem as well. In fact the lower the income goes lower than the National average the more difficult it is for families to afford unexpended expenditures. 

Capital Gains Taxes

Depending on how much capital gains a person has realized during a particular tax year, they may be subject to capital gains tax. Regardless of the income levels of the two persons, the maximum capital gains tax rate is 20%.

Capital Gains Tax
If an individual making $80,000 per year earned capital gains of $20,000 in a given tax year, they would be subject to tax on that sum at a rate of 20%, which would result in a capital gains tax obligation of $4,000.

If a person making $50,000 per year realized capital gains of $15,000 in a given tax year, they would also be subject to tax on that sum at a rate of 20%, which would result in a $3,000 capital gains tax obligation.

Why are poorer people taxed more?

Poorer people are not necessarily taxed more. In fact, they often pay little to no income tax due to tax credits and deductions. However, they may pay a higher percentage of their income in taxes, such as sales tax or property tax.

Which tax most hurts a low-income person?

Sales tax and property tax are often the most regressive taxes, as they affect low-income earners more than high-income earners. This is because these taxes are based on consumption and property ownership, which are not tied to income.

How does taxation affect the poor?

Taxation can have a significant impact on the poor, as they may pay a higher percentage of their income in taxes than higher-income earners. However, taxes can also be used to fund social programs that benefit the poor, such as Medicaid and food assistance programs.

Who pays more in taxes, rich or poor?

Higher-income earners typically pay more in taxes than lower-income earners. However, this can vary depending on the type of tax, as regressive taxes such as sales tax and property tax may disproportionately affect low-income earners.

Why are the rich taxed less than the poor?

The rich are not necessarily taxed less than the poor. However, some argue that the wealthy have more access to tax breaks and deductions, which can lower their overall tax burden. Additionally, the top income tax rate in the United States has decreased over the years.

Why do the wealthy pay such low taxes?

The wealthy may pay lower taxes due to various tax loopholes and deductions. Additionally, the tax code is often more favorable to the wealthy, as they have more resources to hire tax professionals and lobby for tax breaks.

How does tax cause income inequality?

Taxes can potentially exacerbate income inequality if they disproportionately affect low-income earners or fail to adequately tax the wealthy. However, taxes can also be used to fund social programs and address inequality. The relationship between taxation and income inequality is complex and subject to debate.


Lower income families get taxed at an effectively higher rate than higher income families based on multiple tax models. This makes it harder for families to break out of their financial path based on yearly income. 

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