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Is the amount of tax collected proportional to the cost of an item after tax has been added? Explain.

a) Yes, proportional
b) No, not proportional
c) Insufficient information to determine
d) None of the above

User Nemelianov
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1 Answer

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Final answer:

The amount of tax collected is proportional to the cost of an item when a proportional tax rate is applied, meaning the tax amount increases linearly with the item's cost.

Step-by-step explanation:

Is the amount of tax collected proportional to the cost of an item after tax has been added? The answer is (a) Yes, proportional. This is because a proportional tax is one where the tax rate is the same regardless of the amount on which the tax is imposed. Hence, if you have a sales tax rate of 10%, it means that for every dollar spent on an item, $0.10 is collected as tax. If an item costs $1, the tax would be $0.10, making the total cost $1.10. If another item costs $10, the tax would be $1, making the total cost $11. The amount of tax collected scales linearly with the cost of the item.

In the context of sales tax, which is a common example of a proportional tax, if a net taxable estate of $1,000,000 is to be taxed at a fixed rate, the tax collected would be proportionate to that $1,000,000. Similarly, if an estate is worth $2,500,000, the tax collected would be proportionate to the $2,500,000, assuming the tax rate remains constant.

User MIIB
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