Question

Assume that a county's sales tax rate for 2006 was 12.76% but is expected to increase to 13.34% in 2007. According to the passage, how will this sales tax increase affect the amount of taxes an individual pays on a privately purchased vehicle that is assessed by its standard presumptive value?

a. The proportion of the vehicle's cost that can legally be taxed will increase.
b. The proportion of taxes taken from private sales will increase.
c. The 13.34% sales tax will increase the proportion that a taxpayer can deduct when filing a tax return.
d. The proportion that a taxpayer can deduct when filing a return will increase by 0.58%.

Answer 1

The increase in sales tax rate from 12.76% to 13.34% will result in an individual paying more in taxes on a privately purchased vehicle, as the proportion of taxes taken from private sales will increase. Therefore correct option is b

Step-by-step explanation:

If the sales tax rate increases from 12.76% to 13.34%, this will affect the amount of taxes an individual pays on a privately purchased vehicle. The assessed value is determined by the vehicle's standard presumptive value.

To understand the impact of the tax rate increase, you calculate the sales tax by multiplying the purchase price by the sales tax rate.

For example, if the standard presumptive value of a vehicle is $10,000, the sales tax for 2006 would have been $10,000 × 0.1276 = $1,276. In 2007, with the new tax rate, the tax would be $10,000 × 0.1334 = $1,334.

Therefore, the increase in the tax rate results in the individual paying more in sales tax.

Considering the option provided:

b. The proportion of taxes taken from private sales will increase. This is the correct answer because the actual percentage of the vehicle's cost that is taken as sales tax will go up, meaning the individual will pay more in taxes.