Question 1

Define horizontal equity and briefly describe some features of the U.S.federal income tax system that may interfere with achieving it.

Accepted Answer

Horizontal equity is the idea that taxpa...

Question 2

The benefits principle is used to justify

Accepted Answer

A)   sales taxes.
B)   gasoline taxes.
C)   "sin" taxes on cigarettes and alcoholic beverages.
D)   personal income taxes.E) None of the above
F) A) and B)

Question 3

Define the marginal tax rate.

Accepted Answer

The marginal tax rat...

Question 4

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $30,000?

Accepted Answer

A)   both are 10 percent
B)   10 percent and $2,000,respectively
C)   $3,000 and 10 percent,respectively
D)   $3,000 and 20 percent,respectivelyE) A) and D)
F) A) and C)

Question 5

The U.S.tax burden is

Accepted Answer

A)   about the same as most European countries.
B)   higher than most European countries.
C)   lower than most European countries.
D)   higher than all European countries.E) C) and D)
F) All of the above

Question 6

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes,and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person.Which of the following statements is correct?

Accepted Answer

A)   A lump-sum tax would achieve the second goal but not the first.
B)   A regressive tax would achieve the second goal but not the first.
C)   A progressive tax could achieve both goals.
D)   A proportional tax could achieve the second goal but not the first.E) A) and D)
F) A) and B)

Question 7

Table 12-12
United States Income Tax Rates for a Single Individual,2009 and 2010.
 
-Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What is her marginal tax rate in 2010?

Accepted Answer

A)   15%
B)   27%
C)   30%
D)   35%E) A) and B)
F) None of the above

Question 8

Corporate profits distributed as dividends are

Accepted Answer

A)   tax free.
B)   taxed once.
C)   taxed twice.
D)   taxed three times.E) All of the above
F) B) and D)

Question 9

Table 12-15
 
-Refer to Table 12-15.The tax system is

Accepted Answer

A)   proportional.
B)   regressive.
C)   progressive.
D)   lump sum.E) B) and D)
F) A) and B)

Question 10

Suppose a country imposes a lump-sum income tax of $6,000 on each individual in the country.What is the average income tax rate for an individual who earns $60,000 during the year?

Accepted Answer

A)   0%
B)   10%
C)   More than 10%
D)   The average tax rate cannot be determined without knowing the entire tax schedule.E) C) and D)
F) A) and C)

Question 11

Table 12-4
 
-Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Total consumer surplus

Accepted Answer

A)   falls by less than the tax revenue generated.
B)   falls by more than the tax revenue generated.
C)   falls by the same amount as the tax revenue generated.
D)   will not fall since Jennifer will no longer be in the market.E) A) and B)
F) B) and D)

Question 12

Horizontal equity in taxation refers to the idea that people

Accepted Answer

A)   in unequal conditions should be treated differently.
B)   in equal conditions should pay equal taxes.
C)   should be taxed according to their ability to pay.
D)   should receive government benefits according to how much they have been taxed.E) A) and B)
F) A) and C)

Question 13

The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

Accepted Answer

A) True 
 B)False

Question 14

Individual income taxes generate roughly 25% of the tax revenue for the federal government.

Accepted Answer

A) True 
 B)False

Question 15

The typical state spends the most on

Accepted Answer

A)   education.
B)   Medicare and Social Security.
C)   highways.
D)   defense.E) None of the above
F) B) and C)

Question 16

Incentives to work and save are reduced when

Accepted Answer

A)   income taxes are higher.
B)   consumption taxes replace income taxes.
C)   corrective taxes are implemented.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 17

Many economists believe that the U.S.tax system would be made more efficient if the basis of taxation were changed so that people paid taxes,more so than they do now,based on

Accepted Answer

A)   their saving rather than their income.
B)   their spending rather than their income.
C)   their income rather than their wealth.
D)   their wealth rather than their spending.E) All of the above
F) C) and D)

Question 18

The largest budgetary expense for a typical state or local government is

Accepted Answer

A)   National Guard defense.
B)   welfare.
C)   highways.
D)   education.E) B) and D)
F) B) and C)

Question 19

Changing the basis of taxation from income earned to amount spent will

Accepted Answer

A)   necessarily reduce tax revenues.
B)   lower effective interest rates on savings.
C)   distort incentives to earn income.
D)   eliminate disincentives to save.E) A) and B)
F) All of the above

Question 20

Table 12-17
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
 
-Refer to Table 12-17.Which of the three tax systems is regressive?

Accepted Answer

A)   Tax System A
B)   Tax System B
C)   Tax System C
D)   None of the systems are regressive.E) A) and D)
F) A) and C)

Exam 12: The Design of the Tax System

The largest budgetary expense for a typical state or local government is

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The typical state spends the most on

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The U.S.tax burden is

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Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $30,000?

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The benefits principle is used to justify

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Many economists believe that the U.S.tax system would be made more efficient if the basis of taxation were changed so that people paid taxes,more so than they do now,based on

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Table 12-12 United States Income Tax Rates for a Single Individual,2009 and 2010. -Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What is her marginal tax rate in 2010?

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Corporate profits distributed as dividends are

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Table 12-17 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-17.Which of the three tax systems is regressive?

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Table 12-4 -Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Total consumer surplus

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Changing the basis of taxation from income earned to amount spent will

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Define horizontal equity and briefly describe some features of the U.S.federal income tax system that may interfere with achieving it.

Correct AnswerverifiedHorizontal equity is the idea that taxpa...View AnswerShow Answer

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes,and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person.Which of the following statements is correct?

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Suppose a country imposes a lump-sum income tax of $6,000 on each individual in the country.What is the average income tax rate for an individual who earns $60,000 during the year?

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Table 12-15 -Refer to Table 12-15.The tax system is

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Individual income taxes generate roughly 25% of the tax revenue for the federal government.

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The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

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Define the marginal tax rate.

Correct AnswerverifiedThe marginal tax rat...View AnswerShow Answer

Horizontal equity in taxation refers to the idea that people

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Incentives to work and save are reduced when

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Horizontal equity is the idea that taxpa...
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The marginal tax rat...
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