If State H increases its sales tax rate by 1 percent, its sales tax revenue must also increase by 1 percent.

Question

Quizplus · Accepted Answer

The statement is not necessarily true as it assumes that the demand for goods and services in State H will remain constant even after an increase in sales tax rate. In reality, an increase in sales tax rate may negatively impact consumer spending and ultimately result in a smaller increase in sales tax revenue or even a decrease in revenue if the decrease in demand is significant enough.

If State H Increases Its Sales Tax Rate by 1