Imagine that you are the town manager of a city named Springville. This year Springville received a $60,000 grant from the federal government to help support certain public services. Congress has recently voted to reduce this funding to $45,000 next year. One of your primary goals as town manager is to avoid cutting services. Together, you and several city council members have proposed various ways to raise additional revenue. Some have proposed increasing property taxes. Others want to increase the local sales tax from 1 percent to 2 percent. Another proposal is to charge individual income taxes at a flat rate of 2 percent. How will each proposal affect the taxpayers of Springville?

1) If a consumer spends $4,000 per year on taxable items, how much additional sales tax would he or she pay per year under the proposed plan?

2) How many of these consumers would it take to make up the difference between the old federal grant and the new one?

3) If a couple's taxable earnings are $35,000 per year, how much local income tax would the couple pay under the proposed plan?

4) About how many taxpayers would it take to make up the difference between the old federal grant and the new one?