The reliance of Texas on sales tax for revenue means that Texas's tax policies are _____.

• A. neutral
• B. proportional
• C. progressive
• D. regressive

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the definitions of tax structures: a proportional tax takes the same percentage of income from all taxpayers; a progressive tax takes a larger percentage from higher-income earners; a regressive tax takes a larger percentage from lower-income earners.
2. Step 2: Recognize that sales taxes are applied uniformly on purchases regardless of the buyer's income, meaning everyone pays the same rate on goods and services.
3. Step 3: Consider that lower-income individuals tend to spend a higher proportion of their income on consumption compared to higher-income individuals, who can save more.
4. Step 4: Since sales tax is a fixed percentage on purchases, lower-income individuals end up paying a higher fraction of their income in sales taxes than higher-income individuals, making the tax burden heavier on the poor.
5. Step 5: Conclude that because the tax burden decreases as income increases, Texas's reliance on sales tax makes its tax policies regressive.