Question

A state gets its money from a state lottery, a property tax, a sales tax of 5%, and an excise tax. This year it projects that it will receive $32 million from the state lottery, $40 million from the property tax, and $10 million from the excise tax. If the state needs $100 million to cover its expenses, how many dollars worth of taxable items must be purchased in the state this year for the state to break even?

A) $18,000,000
B) $900,000
C) $90,000,000
D) $360,000,000

Answer 1

The state has a shortfall of $18 million to meet its $100 million expense goal after accounting for other revenues. Since its sales tax rate is 5%, it requires $360 million worth of taxable items to be sold to break even, represented by option D) $360,000,000.

Step-by-step explanation:

To calculate the amount of taxable items that must be purchased for the state to break even, we first sum up the projected revenue from the state lottery, property tax, and excise tax. We have:

• State lottery: $32 million
• Property tax: $40 million
• Excise tax: $10 million

Adding these together gives us a total of $82 million ($32 million + $40 million + $10 million).

The state needs $100 million to cover its expenses, so the shortfall is:

$100 million - $82 million = $18 million.

Since the state has a sales tax of 5%, we need to find out how much needs to be spent on taxable items to raise $18 million through sales tax. This is calculated by dividing the amount needed by the sales tax rate, which is 5% or 0.05.

Amount needed from sales tax = $18 million / 0.05

Therefore, the total amount of taxable sales needed is:

$18 million / 0.05 = $360 million.

The correct option for the amount of taxable items that must be purchased for the state to break even is option D) $360,000,000.