Problem:
The state of Indiana charges a retail sales tax of 7%. Consider the following information for threehouseholds:
Household 1: Income: 150,000 Consumption: 45,000
Household 2: Income: 80,000 Consumption: 40,000
Household 3: Income 30,000 Consumption 21,000
Required:
Question 1: Calculate tax liability for each household.
Question 2: What is the average tax rate for each household?
Question 3: What is the marginal tax rate for each household?
Note: Please show the work not just the answer.