The American tattoo artist released the pink product for French cosmetics brand Sephora as part of her Painted Love line.
Website Urban Dictionary defines the word as a famous person short of intelligence.
However, Sephora has been forced to reign in the lipsticks following criticism from angry customers. Parents of children with developmental issues have stated they find the name offensive and insulting.
The company have since issued an apology on their website.
"It has come to our attention that the name of one shade of a lipstick we carry has caused offense to some of our clients and others. We are deeply sorry for that, and we have ceased sale of that shade both in our stores and online," a spokesperson wrote in a statement.
Other shades in the range by Kat - real name Katherine von Drachenberg - include titles such as Backstage Bambi, Underage Red and Hellbent.
While Sephora were remorseful, the inked star seemed bemused by the situation.
She shared her opinion with her followers on Twitter, in a post which has now been deleted.
"At the end of the day, it's just a f**king lipstick (sic)," she wrote.
Managing editor of web newspaper Age of Autism, Kim Stagliano, is shocked by the choice of wording. She believes a lot of people are not aware of the effect their words have on those with disabilities.
"People with disabilities are the last to benefit from what some might call 'political correctness,' and what I would call basic human decency," she wrote in the HuffPost Style blog. "[The word] retard is still bandied about."
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