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Which of the following statements is true? A. States are not allowed to tax personal incomes.
B. The amount of sales tax a state may charge is set by federal law.
C. A state that gives too many tax breaks may not generate enough revenue to balance the budget.
D. Only the federal government may tax corporate income.
The correct answer is C. A state that gives too many tax breaks may not generate enough revenue to balance the budget.
Explanation: When a state offers significant tax breaks, it reduces the amount of revenue generated from taxes. If the tax revenue declines too much due to these breaks, the state may struggle to cover its expenses, leading to budget deficits.
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