the meyer family and the abbott family both consist of a married couple with two children, age eight and…

the meyer family and the abbott family both consist of a married couple with two children, age eight and six. they both spend $20,000 per year on items that are subject to the state sales tax rate of six percent. the meyers, however, make $60,000 per year while the abbotts make $40,000 per year. which of the following statements is true? a. the sales tax is regressive because the abbotts pay a smaller percentage of their (higher) income in sales tax than do the meyers. b. the sales tax is progressive because the meyers pay a higher percentage of their income in sales tax than do the abbotts. c. the sales tax is regressive because the meyers pay a smaller percentage of their income in sales tax than do the abbotts. d. the sales tax is not regressive because the abbotts and the meyers each pay the same percentage of their income in sales tax.

the meyer family and the abbott family both consist of a married couple with two children, age eight and six. they both spend $20,000 per year on items that are subject to the state sales tax rate of six percent. the meyers, however, make $60,000 per year while the abbotts make $40,000 per year. which of the following statements is true? a. the sales tax is regressive because the abbotts pay a smaller percentage of their (higher) income in sales tax than do the meyers. b. the sales tax is progressive because the meyers pay a higher percentage of their income in sales tax than do the abbotts. c. the sales tax is regressive because the meyers pay a smaller percentage of their income in sales tax than do the abbotts. d. the sales tax is not regressive because the abbotts and the meyers each pay the same percentage of their income in sales tax.

Answer

Brief Explanations:

A regressive tax is one where the average tax - rate decreases as the amount subject to taxation increases. The Meyers make $60,000 a year and spend $20,000 on taxable items. The sales tax they pay is 6% of $20,000. Their tax - to - income ratio is $\frac{0.06\times20000}{60000}=\frac{1200}{60000}= 0.02$ or 2%. The Abbotts make $40,000 a year and also spend $20,000 on taxable items. Their tax - to - income ratio is $\frac{0.06\times20000}{40000}=\frac{1200}{40000}=0.03$ or 3%. Since the higher - income family (Meyers) pays a smaller percentage of their income in sales tax, the sales tax is regressive.

Answer:

C. The sales tax is regressive because the Meyers pay a smaller percentage of their income in sales tax than do the Abbotts.