One state adds a 7 percent sales tax to the price of most : GMAT Critical Reasoning (CR)
Check GMAT Club Decision Tracker for the Latest School Decision Releases https://gmatclub.com/AppTrack

 It is currently 20 Feb 2017, 10:59

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

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

Author Message
TAGS:

### Hide Tags

Manager
Joined: 04 Dec 2008
Posts: 104
Followers: 2

Kudos [?]: 179 [0], given: 2

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

### Show Tags

05 Aug 2009, 06:13
1
This post was
BOOKMARKED
00:00

Difficulty:

(N/A)

Question Stats:

57% (01:53) correct 43% (03:21) wrong based on 11 sessions

### HideShow timer Statistics

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 state’s 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.
If you have any questions
New!
Intern
Joined: 24 Sep 2008
Posts: 20
Followers: 0

Kudos [?]: 14 [0], given: 1

### Show Tags

05 Aug 2009, 06:43
my take is A.

Reason:
Federal tax is based on your income but this new state tax is based on spending.
Basic need products are same for both high income and low income earners and even one earns less but need to pay same tax, which is just opposite of Federal tax policy.

what is the OA?

-STL
Intern
Joined: 25 Jul 2009
Posts: 44
Followers: 0

Kudos [?]: 4 [0], given: 0

### Show Tags

05 Aug 2009, 11:10
A for me too
Senior Manager
Joined: 17 Jul 2009
Posts: 299
Concentration: Nonprofit, Strategy
GPA: 3.42
WE: Engineering (Computer Hardware)
Followers: 1

Kudos [?]: 41 [0], given: 9

### Show Tags

05 Aug 2009, 16:39
A for me as well. the conclusion stands only if spending is the same amount (not percentage) across the board, then lower income families is taxed at a higher rate, which is the opposite of the federal tax
Director
Joined: 05 Jun 2009
Posts: 850
WE 1: 7years (Financial Services - Consultant, BA)
Followers: 11

Kudos [?]: 311 [0], given: 106

### Show Tags

06 Aug 2009, 00:00
A it is.
_________________

Consider kudos for the good post ...
My debrief : http://gmatclub.com/forum/journey-670-to-720-q50-v36-long-85083.html

Manager
Joined: 04 Dec 2008
Posts: 104
Followers: 2

Kudos [?]: 179 [0], given: 2

### Show Tags

06 Aug 2009, 03:27
OA is A
Manager
Joined: 01 Jul 2009
Posts: 138
Location: India
Concentration: Entrepreneurship, Strategy
GMAT 1: 680 Q48 V35
GPA: 3.8
WE: General Management (Retail)
Followers: 26

Kudos [?]: 497 [0], given: 13

### Show Tags

06 Aug 2009, 04:27
am clueless on this one
_________________

i love kudos consider giving them if you like my post!!

http://gmatclub.com/forum/critical-reasoning-for-beginners-82111.html
QUANT NOTES FOR PS & DS: notes to help you do better in Quant. Click Below
http://gmatclub.com/forum/quant-notes-for-ps-ds-82447.html
GMAT Timing Planner: This little tool could help you plan timing strategy. Click Below
http://gmatclub.com/forum/gmat-cat-timing-planner-82513.html

Senior Manager
Joined: 21 Jul 2009
Posts: 265
Location: New York, NY
Followers: 3

Kudos [?]: 110 [0], given: 23

### Show Tags

17 Aug 2009, 03:40
A

A progressive tax makes lower income citizens pay less tax. If all citizen spend the same amounts, everyone will be paying the same tax, which would mean that lower income citizens are paying a larger % of their income that higher income citizens.

I think this question is very difficult to anyone who does not have any pre-exposure to tax theory. The text does not clue you in to the rationale that's going on. I happen to be a CPA so this was easy for me.

Posted from my mobile device
Senior Manager
Joined: 17 Jul 2008
Posts: 250
Followers: 4

Kudos [?]: 316 [0], given: 29

### Show Tags

18 Aug 2009, 01:14
Bold part is the conclusion : lower income higher tax rate
Premise 1: 7% of sale tax on sales

Assume 100 $spent for monthly grains 7$ tax both if monthly income is 500 $then this makes 1.4% of monthly income. Assume 1000$ is monthly income then this makes 0.07% of monthly income.

If the tax is not equal to everyone then these percentages will be changed may be they will be equal which will violate the conclusion.
_________________

Please give kudos if you enjoy the explanations that I have given. Thanks

Re: One State   [#permalink] 18 Aug 2009, 01:14
Similar topics Replies Last post
Similar
Topics:
11 One state adds a 7 percent sales tax to the price of most 24 03 Jul 2011, 12:28
2 One state adds a 7 percent sales tax to the price of most 8 30 Sep 2010, 04:24
One state adds a 7 percent sales tax to the price of most 4 28 Jan 2010, 22:01
10 One state adds a 7 percent sales tax to the price of most 9 18 Jan 2010, 06:10
One state adds a 7 percent sales tax to the price of most 3 05 May 2008, 16:28
Display posts from previous: Sort by