Question

Eli has annual earnings of $100,000 and Molly has annual earnings of $50,000. Each consumer goes to the mall and purchases a microwave oven for $100, and each pays an additional 7%, or $7, in sales tax. This tax is:
A. regressive.
B. a wealth tax.
C. a property tax.
D. progressive.

Answer 1

Answer:

The correct option is A

Explanation:

Regressive tax is the kind of tax which is imposed or held in such a way or method, that the rate of tax decreases or falls as the amount subject to the taxation rises.

It describe the effect of distribution on the expenditure or on the income of the person, as the rate progresses or increases from high to low, so that it could make average tax rate increases or exceeds the marginal tax rate.

So, in this case, when both of went to purchase the oven, they have to pay extra 7%, in sales tax, which is a regressive tax.