The sales tax
A)is consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income people.
B)is not consistent with the ability-to-pay principle because low-income individuals tend to spend a larger fraction of their income than do high-income individuals.
C)is not consistent with the ability-to-pay principle because low-income individuals tend to purchase a smaller bundle of goods and services compared to high-income individuals.
D)is not consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income individuals, yet pay the same sales tax rate.

Question

Quizplus · Accepted Answer

The ability-to-pay principle states that those who have more income should pay a larger share of their income in taxes than those with less income. However, the sales tax is not consistent with this principle because low-income individuals tend to spend a larger fraction of their income on goods and services than do high-income individuals. This means that the sales tax is a regressive tax, as it takes a larger percentage of income from lower-income individuals than from higher-income individuals.

The Sales Tax