Which of the following best describes a regressive tax?

A regressive tax is characterized by its impact on individuals with varying income levels. This type of tax structure takes a larger percentage of income from lower-income earners compared to higher-income earners. Consequently, as an individual's income increases, the percentage of their income that is taken by the tax decreases. This disproportionate effect leads to a financial burden that is heavier on those with less income, highlighting the inequity that regressive taxes can create in a tax system.

In contrast, the other options provide different descriptions that do not align with the definition of a regressive tax. A tax that takes a smaller percentage from high-income earners would typically be considered progressive, where higher earners contribute more. A tax that is the same percentage for all income levels describes a flat tax system, and the statement regarding capital gains refers specifically to transactions involving the sale of assets, which does not inherently imply a regressive structure. The correct understanding of a regressive tax is crucial in discussions about tax policy and its effects on social equity.