Cecil Bohanon, an economist at Ball State University, and Brian Pizzola, an economist with the accounting firm Ernst & Young, used a proposed tax on income earned by credit card lenders in Minnesota to explain how tax incidence is determined. The tax, which state lawmakers did not pass, would have been imposed on lenders who charged credit card customers more than 15 percent interest on their balances. Bohanon and Pizzola explained that many of those who paid high interest rates were consumers with fewer other sources of credit, and there was nothing to prevent lenders from further raising interest rates after the tax was imposed. John Spry, an economist at St. Thomas University, stated that the proposed tax was “highly regressive . . . twenty percent of the new tax would be paid by Minnesota families with the lowest 10 percent of income. Thirty-seven percent of the tax would be paid by families with the lowest 20 percent of income.” 

a. Explain why John Spry believed that the proposed tax would have been “highly regressive.”

b. Do Bohanon and Pizzola believe the elasticity of demand of those who would have been most affected by the tax was more or less elastic than the elasticity of supply of credit card lenders? Briefly explain.