The term "flat sales tax" implies that the tax rate is the same for all transactions, regardless of the amount of the purchase or the income level of the buyer. This means that for every purchase, an additional 1% is charged, and this percentage does not change based on the value of the groceries or the person's ability to pay. This type of tax is known as a proportional tax.
Here are the characteristics of each type of tax structure referenced in the options given:
a. Variable - A variable tax would imply that the tax rate changes based on some factor, such as the amount of the purchase or the income of the purchaser. Since the stated tax is a flat 1%, it does not vary and therefore it is not a variable tax.
b. Proportional - In a proportional tax system, also known as a flat tax, everyone pays the same fraction of their income or purchases, regardless of their total income or expenditure. Given that the tax is a flat 1% for all groceries, it fits the definition of a proportional tax structure.
c. Regressive - A regressive tax is structured in such a way that as income increases, the tax rate effectively decreases. This often means that lower-income individuals bear a larger burden relative to their income compared to higher-income individuals. A flat sales tax could be considered regressive in its impact because lower-income individuals spend a larger portion of their income on necessities like groceries, so the flat tax takes a larger percentage of their income. However, since the question describes the structure of the tax itself rather than its impact, the technically correct answer isn't regressive.
d. Progressive - A progressive tax is structured so that as income increases, the tax rate also increases. Since the 1% tax on all groceries does not increase with higher income or larger purchases, it is not a progressive tax.
Therefore, the correct answer to the type of tax structure for a flat 1% sales tax on all groceries would be:
b. Proportional
