The state tax division is evaluating the money raised by
The state tax division is evaluating the money raised by state sales taxes. Using data from all states, division members regress the amount of money raised by the sales tax per capita on the average per-capita income (X1) and a dummy variable coded 1 if the state taxed the sale of groceries (X2). They get the following results:
 = .03 + .0218X1 + 147.18X2
sb1 = .0043 sb2 = 36.3 Sy|x = 31.40
R2 = .86 Adj. R2 = .85
Interpret this regression. Present a hypothesis about placing a tax on the sale of groceries and evaluate this hypothesis. How much could a state with a per-capita income of $ 33,947 and a tax on groceries raise per capita with a sales tax?
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