Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Background: As a newly hired policy analyst in the Office of Management and Budget for TreeCity, you have been tasked with assessing a soda tax

Background: As a newly hired policy analyst in the Office of Management and Budget for TreeCity, you have been tasked with assessing a soda tax proposal from the Mayors Office. The soda tax proposal is intended to both reduce consumption of soda and also generate revenue for climate change adaptation efforts the city plans to undertake (e.g., efforts to reduce flooding due to extreme weather events). The proposal is to place an additional sales tax on soda purchases. Currently, these purchases are subject to the existing 7% sales tax. Under the Mayors Office proposal, an additional tax equal to 12% of the purchase price would be imposed on purchases of soda. Consequently, the total sales tax rate on soda would be 19%..

A. Using the information provided in the table below calculate for each of the four families the effective tax rates of the soda tax. Please calculate the effective tax rates for both (i) before and (ii) after the policy (tax) change.

Family type

Low Income

Middle Income 1

Middle Income 2

High Income

Family income

$30,000

$75,000

$75,000

$145,000

Family size

3

3

3

3

Projected soda purchases subject to new additional tax

$1,300

$1,500

$1,350

$1,750

Show work here or in separate Excel file

Effective Tax Rate:

Before New Soda Tax

After New Soda Tax

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting

Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones

5th Edition

0130906999, 978-0130906991

More Books

Students also viewed these Accounting questions

Question

How does an applicant apply?

Answered: 1 week ago