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# One state adds a 7 percent sales tax to the price of most

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Director
Joined: 06 Jan 2008
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One state adds a 7 percent sales tax to the price of most [#permalink]

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05 May 2008, 17:28
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One state adds a 7 percent sales tax to the price of most products purchased within its jurisdiction. This tax, therefore, if viewed as tax on income, has the reverse effect of the federal income tax: the lower the income, the higher the annual percentage rate at which the income is taxed.

The conclusion above would be properly drawn if which of the following were assumed as a premise?

(A) The amount of money citizens spend on products subject to the state tax tends to be equal across income levels.
(B) The federal income tax favors citizens with high incomes, whereas the state sales tax favors citizens with low incomes.
(C) Citizens with low annual incomes can afford to pay a relatively higher percentage of their incomes in state sales tax, since their federal income tax is relatively low.
(D) The lower a states sales tax, the more it will tend to redistribute income from the more affluent citizens to the rest of society.
(E) Citizens who fail to earn federally taxable income are also exempt from the state sales tax.
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CEO
Joined: 17 May 2007
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Re: CR - income tax [#permalink]

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05 May 2008, 17:50
Straight A buddy.
Director
Joined: 26 Jul 2007
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Schools: Stern, McCombs, Marshall, Wharton
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Re: CR - income tax [#permalink]

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05 May 2008, 19:54
I agree it's A.

The conclusion is that the sales tax is a higher percentage on lower income. This assumes that people with a higher income are not spending more than people with lower income.
Director
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Re: CR - income tax [#permalink]

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06 May 2008, 16:29
Thanks OA: A
Re: CR - income tax   [#permalink] 06 May 2008, 16:29
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