Chapter 2, Problem 2AP

The city of Lakeland levies a 2 percent tax on the value of all restaurant meals served to the public within the city limits. This year, the aggregate value subject to tax was $29.4 million, so current year revenue was $588,000. Lakeland plans to decrease the tax rate next year to 1.5 percent. Compute next year’s restaurant tax revenue assuming:

1. a. Next year’s tax base equals the current year base.
2. b. Next year’s tax base increases to $36 million.
3. c. Next year’s tax base increases to $41 million.