What is one major difference between income tax and sales tax?A.Income tax is based on gross income, while sales tax is based on taxable income.B.Income tax is regressive, while sales tax is progressive.C.Income tax is based on taxable income, while sales tax is based on gross income.D.Income tax is progressive, while sales tax is regressive.
Question
What is one major difference between income tax and sales tax?A.Income tax is based on gross income, while sales tax is based on taxable income.B.Income tax is regressive, while sales tax is progressive.C.Income tax is based on taxable income, while sales tax is based on gross income.D.Income tax is progressive, while sales tax is regressive.
Solution
The major difference between income tax and sales tax is D. Income tax is progressive, while sales tax is regressive.
Here's why:
Income tax is a direct tax that governments impose on financial income generated by all entities within their jurisdiction. It is progressive because the tax rate increases as the taxable amount of income increases. In other words, individuals who earn more income pay a higher percentage of their income in taxes.
On the other hand, sales tax is a tax paid to a governing body for the sales of certain goods and services. It is considered regressive because it takes a larger percentage of income from low-income earners than from high-income earners. This is because the tax is applied uniformly to all consumers regardless of their income levels.
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