Question

A heated debate occurred in a state where there was a proposal to increase the sales tax by 4%. Many felt

increasing the sales tax would be unfair to those with low incomes. Why?
A. People with lower incomes will pay a higher percentage of their total earnings for sales tax.
B.People with lower incomes won't notice the increased sales tax.
C. An increased sales tax will mean that the wealthy will be paying higher taxes than lower income
people.
D. Consumers won't have any say in how the sales tax will be used.

Answer 1

Answer: A. People with lower incomes will pay a higher percentage of their total earnings for sales tax.

Explanation: The sales tax simply refers to the tax being paid when goods are purchased. This tax may be referred to the value added tax (VAT) being paid by the consumer when he or she purchases a good. By increasing increasing the sales tax, that is the value added tax paid on goods when one goes shopping by 4%, this will result in low income earners spending a large chunk of their income on sales tax. Sales tax are analyzed as being regressive in nature as they seem to hit the low income earners the most as it consumes a large percentage of their income. This is the reason why it is was protested as it seems unfair on the low income population.