Mr. Smith earns $100,000 per year. Each year he spends $50,000 and saves $50,000. He pays a 5 percent sales tax on all of his spending. Assuming the sales tax is the only tax he pays, his average tax rate out of his income is

Question

Quizplus · Accepted Answer

Mr. Smith spends $50,000 and pays a 5% sales tax on it, which is $2,500. His average tax rate is $2,500 divided by his total income of $100,000, which is 2.5%.

Mr Smith Earns $100,000 Per Year