Which type of tax is measured against what is spent rather than income?

The correct answer is a regressive tax, which is characterized by its impact on consumers based primarily on their level of spending rather than their income. This type of tax takes a larger percentage from low-income earners than from high-income earners because it is typically applied uniformly to purchases without regard to the taxpayer's ability to pay.

For example, sales taxes and excise taxes exemplify regressive taxes, where every consumer pays the same rate regardless of their financial circumstances. As a result, those with lower incomes could find these taxes disproportionately burdensome, as they represent a larger share of their overall income compared to wealthier individuals who will spend less of their total income on taxable goods.

In contrast, progressive taxes increase the rate as income rises, meaning higher earners contribute a greater percentage of their income. Proportional taxes maintain the same rate regardless of income level, while fixed taxes remain constant regardless of the amount of income or expenditures. Understanding these classifications is crucial for analyzing tax policies and their implications on different income groups within society.