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Income Consumption House 1: $150,000 $45,000 House 2: $80,000 $40,000 House 3: $30,000 $21,000 There is...

Income Consumption

House 1: $150,000 $45,000

House 2: $80,000 $40,000

House 3: $30,000 $21,000

There is a retail sales tax of 7% what would the sales tax liability be for each house. What is the average tax rate for each house?

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Answer #1

Answer :

Retail Sales Tax is consumption based tax. It is calculated on Consumption.

Sales tax liablity = Consumption * sales tax rate

House 1 Sales tax liablity = 45000 * 7% ==> 3150

House 2 Sales tax liablity = 40000 * 7% ==> 2800

House 3 Sales tax liablity = 21000* 7% ==> 1470

Average tax rate = (Sales tax liablity / Income) * 100

House 1 Average tax rate = (3150/150000) * 100 ==> 2.1%

House 2 Average tax rate = (2800/80000) * 100 ==> 3.5%

House 3 Average tax rate = (1470/30000) * 100 ==> 4.9%

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