Answers to Week 1 Assignment
The statement of facts identifies three taxpayers: Mr. JK, JK Services, and JK Realty.
The government of the locality in which Mr. JK resides, the state government of Vermont, and
the U.S. government have jurisdiction to tax Mr. JK. The local governments of the four counties
in which JK Services conducts business, the state government of Vermont, and the U.S.
government have jurisdiction to tax JK Services. The city of Boston, the state government of
Massachusetts, and the U.S. government have jurisdiction to tax JK Realty.
The tax is $8,300 ($415,000 × 2%).
The tax is $19,000 ([$500,000 × 2%] + [$225,000 × 4%]).
Volume of sales before rate increase
Original tax rate
Revenue before rate increase
Volume of sales after rate increase
New tax rate
Revenue after rate increase
Additional revenue ($42,600,000
Volume of sales added to tax base