From the viewpoint of tax incidence, a general sales tax on goods and services is usually classified as which type of tax?

Introduction / Context:
Taxes can be classified as progressive, proportional, or regressive depending on how the tax burden changes as income increases. A general sales tax is imposed on purchases of goods and services and is usually charged at a uniform rate. Understanding why such a tax is typically called regressive is important for questions on public finance and economic policy. This question asks how sales tax is usually classified in terms of tax incidence across different income groups.

Given Data / Assumptions:

• Sales tax is generally levied as a fixed percentage of the selling price of goods and services.
• All consumers who buy a particular good pay the same tax rate per unit of that good, regardless of their income.
• Lower income households tend to spend a larger share of their income on consumption than higher income households.
• We are focusing on the effective burden as a proportion of income, not only on the rate applied to purchases.
• The question is about typical incidence patterns, not about specially designed exemptions or rebates.

Concept / Approach:
A tax is considered regressive if the percentage of income paid in tax decreases as income rises. Because sales tax is usually a uniform percentage of expenditure, households that spend a larger fraction of their income on taxable goods will pay a higher proportion of their income as tax. Lower income households often spend most of their income on consumption, while higher income households can save and invest a larger share. As a result, when a uniform sales tax is applied, the effective tax burden as a share of income tends to be higher for poor households than for rich households, making the tax regressive.

Step-by-Step Solution:
Step 1: Define a regressive tax as one where the tax paid as a percentage of income falls as income rises.Step 2: Note that sales tax is charged at the same rate on purchases for all consumers regardless of income level.Step 3: Recognise that lower income households typically spend most of their income on consumption and save very little.Step 4: Recognise that higher income households may save or invest a substantial portion of their income and do not spend all of it on taxable goods.Step 5: Conclude that the proportion of income paid as sales tax is higher for lower income households and lower for higher income households.Step 6: Therefore, sales tax is usually described as a regressive tax.

Verification / Alternative check:
Studies of tax incidence often show that consumption based taxes such as sales tax and value added tax tend to place a heavier relative burden on poorer households when measured as a percentage of income. While higher income people may pay more in absolute rupees because they buy more goods and services, the share of their income paid in such taxes is usually smaller. Public finance texts explain this pattern and classify general sales taxes as regressive unless specifically structured with exemptions or rebates to protect low income groups.

Why Other Options Are Wrong:
Option a uses the term aggressive, which is not a standard classification in tax incidence analysis and does not describe the pattern of sales tax. Option c claims that sales tax is both aggressive and regressive in all situations, which is vague and inaccurate. Option d incorrectly suggests that sales tax has no impact on income distribution, ignoring well documented incidence effects. Option e describes a progressive tax, where higher income groups pay a larger share of their income in tax, which is not the usual pattern for simple sales taxes.

Common Pitfalls:
Students sometimes misinterpret regressivity because they focus on how much tax is paid in total rather than on what share of income is paid. They may reason that rich people spend more and therefore pay more sales tax, overlooking the key idea that regressivity is about the proportion of income, not the absolute amount. To avoid this mistake, remember that tax incidence analysis compares tax paid relative to income across different income levels.

Final Answer:
A general sales tax is usually classified as a regressive tax in which the tax burden falls more heavily on lower income groups as a proportion of income.