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about tax, i need your help!

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about tax, i need your help!

by ynjynj » Fri Nov 21, 2008 11:06 pm
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 fedral 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 form the state sales tax.

the correct answer is A, but i am totally confused and don't understand at all! help me Thanks
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by raunekk » Sat Nov 22, 2008 7:04 am
conclusion:
the lower the income, the higher the annual percentage rate at which the income is taxed.

According to POE

imo:A

A) the amount of money citizens spend on products subject to the state tax tends to be equal across income levels.


B) the fedral income tax favors citizens with high incomes, whereas the state sales tax favors citizens with low incomes.

We cannot dertermine which tax supports whom.

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.

stimulus doesnt say anything about what the citizens can affort.

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.

Doesnt support the conclusion.

E) citizens who fail to earn federally taxable income are also exempt form the state sales tax.

out of scope.
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by mals24 » Sat Nov 22, 2008 7:42 am
IMO A

According to the federal income tax - higher a persons income, higher will be the income tax and vice versa.

Sales tax - Everyone have to pay a fixed sales tax, regardless of their income. So if your income is less you're income tax will be high.

Negate option A.

If the The amount of money citizens spend on products subject to the state tax is not equal across income levels, then people with higher incomes will be charged a higher tax and people with lower income will be charged a lower tax. Hence your conclusion does not hold and falls apart.

Answer is A.
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by NehaBhandari » Sat Nov 22, 2008 2:03 pm
IMO A
HI mals24
According to the federal income tax - higher a persons income, higher will be the income tax and vice versa. (not clear with this line)

I thought it was the other way
higher the income , lower will be the tax and vice versa..
I am still not clear with the soln.. can u explain in more detail pls..
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by mals24 » Sat Nov 22, 2008 2:15 pm
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 reverse of lower the income, higher the tax is not higher the income lower the tax. Both these statements mean the same thing btw.

The reverse of lower the income, higher the tax is higher the income higher the tax. Just change one variable either the income or the tax. If you change both the effect will be the same.
higher the income , lower will be the tax and vice versa..
What is the vice-versa of this statement? It'll be the same effect which is mentioned in the question. Then how is this statement the opposite!!!

Your basically repeating the mentioned effect in another way and stating it as the opposite.

Hope the logic is clear. :)
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by NehaBhandari » Sat Nov 22, 2008 2:30 pm
yep .. my bad .. :o u got me zapped .. :o thanks
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by nervesofsteel » Mon Nov 24, 2008 12:49 am
A..

for eg... 10% is the sale tax

Every one has to spend $1000 on grocery and thus have to pay $100 as ST

low income group has Income = 5000
High income group has = 10000

now %age tax on low income is 100/5000= 2%
%age tax on high income group is 100/10000 = 1%

So Low income group is charged more

Hope its clear
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by nicolette » Fri May 13, 2016 1:35 am
In my opinion A is the most logical one
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by vanessa.m » Fri May 13, 2016 1:39 am
I feel A is the answer. what about OA?
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