Question

The Roosevelts and the Jaspers live in the same city and pay the same sales

Roosevelts made $91,000 and the Jaspers made $37,000 last year, is the
sales tax in their city an example of a regressive tax?
tax rate, and both families made $16,000 in taxable purchases last year. If the If

Answer 1

Yes, the sales tax in their city is an example of regressive tax

Explanation:

Firstly, we need to understand what is meant by the term regressive tax.

What is meant by a regressive tax system is a system of taxation in which there is a decrease in tax rate as there is an increase in amount subjected to tax.

Now, the key to knowing if what we have in the question is a regressive taxation is by calculating the percentage of the tax that was paid.

For the Roosevelt’s , the percentage of tax paid would be 16,000/91,000 * 100% = 17.6%

For the Jasper’s, the percentage of tax paid would be 16,000/37,000 * 100% = 43.24%

We can see that at a lower amount subjected to tax, the Jasper’s paid more and thus we can conclude irrevocably that sales tax in their city is an example of a regressive tax