Question

Bill earning $500,000 and Morgan who earns $10,000 both pay a 40-cent gasoline tax for each gallon they put into their BMW cars.

A) Income Tax
B) Sales Tax
C) Property Tax
D) Excise Tax

Answer 1

The tax paid by both individuals on gasoline for their BMW cars is an excise tax; a set fee charged per gallon regardless of one's income.

Step-by-step explanation:

The tax that both Bill and Morgan are paying, regardless of their income, is an excise tax. This tax is not based on income level but is a set amount charged for each gallon of gasoline they purchase. The federal government imposes this type of tax on specific goods such as gasoline, tobacco, and alcohol.

Since it's a tax on a particular good and not based on the value of the item or the income of the person buying it, excise taxes are different from sales, income, or property taxes. Typically, excise taxes are earmarked for funding specific government programs, like highway and infrastructure maintenance. In this scenario, the correct answer is D) Excise Tax.