Al has an income of $20,000; Betty's income is $40,000. With no sales tax in place, Al spends $5000 on grocery food and Betty spends $8000.
(A) If the state government now taxes all grocery food at 10%, and these two folks do not reduce their food purchases whatsoever, then is this sales tax proportional, progressive, or regressive? SHOW AND LABEL ALL WORK, and interpret the numerical results.
(B) If the above policy is changed such that now Al receives a tax credit of $100 at the end of the year, will your conclusion change? Again, SHOW AND LABEL ALL WORK, and interpret the numerical results.