In a country, an income tax is applied so that the first $10 000 of earnings is tax-free, the following $20 000 is taxed at 20% and any earnings above $30 000 is taxed at a maximum rate of 40%. In addition, a sales tax of 10% is charged on most goods. Which mix of tax changes would be most likely to produce a more equal income distribution in the country?
- Aincome tax: a higher tax-free allowance; sales tax: a higher rate of tax
- Bincome tax: a higher top rate of tax; sales tax: a lower rate of tax
- Cincome tax: a lower tax-free allowance; sales tax: a higher number of exempt goods
- Dincome tax: a lower top rate of tax; sales tax: a lower number of exempt goods