In a given year, Jennifer earns $50,000 and spends $40,000. During the same period, Stcve earns $30,000 and spends $27,000. If Jennifer and Steve both must pay a 10 percent sales tax on goods purchased, the sales tax is

(A) a higher perccntage of income for Jennifer than for Steve

(B) a higher percentage of spending for Steve

Question

Business

Maxim Stanton

4 October, 02:23

In a given year, Jennifer earns $50,000 and spends $40,000. During the same period, Stcve earns $30,000 and spends $27,000. If Jennifer and Steve both must pay a 10 percent sales tax on goods purchased, the sales tax is

(A) a higher perccntage of income for Jennifer than for Steve

(B) a higher percentage of spending for Steve

+1

Answers (1)

Know the Answer?

Monica Jacobs · Answer 1

The sales tax is regressive with respect to income

Explanation:

sales tax by Jennifer = 0.1*30000

= 3000

tax/income = 3000/50000

= 6%

sales tax by steve = 0.1*27000

= 2700

tax/income = 2700/30000

= 9%

The tax increases with decrease in income, it indeed is regressive on the whole.

Therefore, The sales tax is regressive with respect to income