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.
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IMO CSunny22uk wrote: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.
1,the information mention sales tax, income tax 2, the conclusion is the lower income the higher income tax they pay. Thus find the connection between 1 and 2.
A.it doesn't mention sales tax wrong
B.irrelevent
C.just explain the conclusion
D.irrelevent
E.irrelevent.
imo:A
premise1: 7 percent sales tax to the price of most products purchased within its jurisdiction
(A) The amount of money citizens spend on products subject to the state tax tends to be equal across income levels.
In my opinion this is d only option that fills the gap!!
thx
let me know if i am wrong..
premise1: 7 percent sales tax to the price of most products purchased within its jurisdiction
(A) The amount of money citizens spend on products subject to the state tax tends to be equal across income levels.
In my opinion this is d only option that fills the gap!!
thx
let me know if i am wrong..
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Vignesh.4384
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raunekk,
Passase says : therefore, if viewed as tax on income, has the reverse effect of the federal income tax
Even if the amount of money citizens spend on products subject to the state tax tends not to be equal across income levels.. It still means that there is a reverse effect of the federal income tax.
Dont you think so ?
Passase says : therefore, if viewed as tax on income, has the reverse effect of the federal income tax
Even if the amount of money citizens spend on products subject to the state tax tends not to be equal across income levels.. It still means that there is a reverse effect of the federal income tax.
Dont you think so ?
@Vignesh.4384
in my opinion....
no where in d argument or d conclusion "what consumers can afford is discussed!!"
suppose the income of a high income person is $100
and of a low income person is $10
IF d tax is same for both...ie 7%..ten d federal income tax will gain frm d high income person but will not gain nethg from d low person income..
TAX is generally increased to get more money from people..but if the tax is same for lower income people .ten federal income tax wont gain nethg from tat income segment..and thus will have reverse effects..
these are just my views.. many a times i tend to go too deep..
..so might be wrong..
let me know if u differ...
in my opinion....
no where in d argument or d conclusion "what consumers can afford is discussed!!"
suppose the income of a high income person is $100
and of a low income person is $10
IF d tax is same for both...ie 7%..ten d federal income tax will gain frm d high income person but will not gain nethg from d low person income..
TAX is generally increased to get more money from people..but if the tax is same for lower income people .ten federal income tax wont gain nethg from tat income segment..and thus will have reverse effects..
these are just my views.. many a times i tend to go too deep..
..so might be wrong..let me know if u differ...
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santa_dem
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Usualy, the federal tax rate is higher as the income grows. The sales tax is viewed to have a reverse efect, meaning that it taxes more the ones with a lower income. If this is to be true, than A has to be true.Sunny22uk wrote:One state adds a 7 percent sales tax to the price of most products purchased within its jurisdiction. This tax, therefore, if viewed as tax on income, has the reverse effect of the federal income tax: the lower the income, the higher the annual percentage rate at which the income is taxed.
The conclusion above would be properly drawn if which of the following were assumed as a premise?
(A) The amount of money citizens spend on products subject to the state tax tends to be equal across income levels.
(B) The federal income tax favors citizens with high incomes, whereas the state sales tax favors citizens with low incomes.
(C) Citizens with low annual incomes can afford to pay a relatively higher percentage of their incomes in state sales tax, since their federal income tax is relatively low.
(D) The lower a state’s sales tax, the more it will tend to redistribute income from the more affluent citizens to the rest of society.
(E) Citizens who fail to earn federally taxable income are also exempt from the state sales tax.
Consider the following two situations:
1.A is true
lowest income - 700$
highest income - 1000$
Money spent on products - 100 for both categories.
This means that both categories are charged an extra 7$(7%*100$) for the products bought.
The sales tax (7$) represents 1% of the lowest income and only 0,7% of the highest income, which rules to the conclusion that sales tax has the reverse efect of the Federal Income tax.
2. A is not true
lowest income 700$, spendings - 10;
highest income 1000$, spendings - 50;
Sales tax will be
0,7$, or 0,1% for the lowest income,
and 35$, or 3,5% for the highest income.
We can see that the sales tax is also higher as for the highest income in this case, leading to the conclusion that it has the same effect as the federal tax does.
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Vignesh.4384
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raunekk,
I think you have not understood the question properly.
I think it is probably because of the income tax thingy ...
What this question is tying to say :
A product (tooth paste) costs 100$ ( just for ease of calculation)
and 7% tax on this will be 7$ . So total price = 107 $.
Assume a rich guy who earns a 100,000$ buys this tooth paste and a poor guy who earns only 1000 $ buys this tooth paste ..
According to federal tax policy the rich guy might hav to pay 30% of his income as tax and the poor guy might only need to pay 10% as federal tax since his income itself is too low. I dont live in the US but i guess the govt wont tax the poor guy as much as they tax the rich guy.
The queation says what i have tried to say above . The poor guy should be taxed lesser than the richer guy, but because the state tax of 7% is added to the tooth paste then the rick man and the poor man will have to pay the same amount.
Now try understanding option A.
If u feel i am wrong then pls let me know .
I guess this question is a bit messy.. I know my explanation is not some thing that is easy to understand but if u hav any difficulty pls ask me.
Regards,
Vignesh
I think you have not understood the question properly.
I think it is probably because of the income tax thingy ...
What this question is tying to say :
A product (tooth paste) costs 100$ ( just for ease of calculation)
and 7% tax on this will be 7$ . So total price = 107 $.
Assume a rich guy who earns a 100,000$ buys this tooth paste and a poor guy who earns only 1000 $ buys this tooth paste ..
According to federal tax policy the rich guy might hav to pay 30% of his income as tax and the poor guy might only need to pay 10% as federal tax since his income itself is too low. I dont live in the US but i guess the govt wont tax the poor guy as much as they tax the rich guy.
The queation says what i have tried to say above . The poor guy should be taxed lesser than the richer guy, but because the state tax of 7% is added to the tooth paste then the rick man and the poor man will have to pay the same amount.
Now try understanding option A.
If u feel i am wrong then pls let me know .
I guess this question is a bit messy.. I know my explanation is not some thing that is easy to understand but if u hav any difficulty pls ask me.
Regards,
Vignesh
According to federal tax policy the rich guy might hav to pay 30% of his income as tax and the poor guy might only need to pay 10% as federal tax since his income itself is too low. I dont live in the US but i guess the govt wont tax the poor guy as much as they tax the rich guy.
@Vignesh.4384
how can u say "the rich guy might hav to pay 30% of his income as tax and the poor guy might only need to pay 10% as federal tax since his income itself is too low."
Doesnt tat mean u are changing the premise or putting ur own views???:shock: .. or have i misunderstood it???
please clearify what you mean...
thx..
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Vignesh.4384
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raunekk,
Question says : 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.
If u read the Red part carefully it means that :
The federal government had provisions that poor people pay lesser tax than richer people.
But if the state imposes 7 % tax on material then every one wil be playing the same amount of tax. This is contrary to the federal tax lax.
By saying reverse effect of the federal income tax the author is trying to mean the phenomena i mentioned above i guess.
Question says : 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.
If u read the Red part carefully it means that :
The federal government had provisions that poor people pay lesser tax than richer people.
But if the state imposes 7 % tax on material then every one wil be playing the same amount of tax. This is contrary to the federal tax lax.
By saying reverse effect of the federal income tax the author is trying to mean the phenomena i mentioned above i guess.
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kiranlegend
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I feel this is between A and ESunny22uk wrote: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. --- favors??
(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. -- can afford since their federal income tax is 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. --- no distribution as the sales tax amount will be the same for every one.
(E) Citizens who fail to earn federally taxable income are also exempt from the state sales tax.
I would go with E.. what is the OA?
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jessica.ng1988
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nervesofsteel
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A should be the answer...
Let a rich man earns $1000
and poor earns $10
Now they buy soomething with tax $7 as tax paid
For rich guy its .7% of his income
for poor guy its 70% of income
That means federal law has reverse effect .... of charging poor a higher tax than richer... when both spend same atual amount as tax...
Let a rich man earns $1000
and poor earns $10
Now they buy soomething with tax $7 as tax paid
For rich guy its .7% of his income
for poor guy its 70% of income
That means federal law has reverse effect .... of charging poor a higher tax than richer... when both spend same atual amount as tax...
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vivek.kapoor83
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