Question 1

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

Accepted Answer

A)   the ability-to-pay principle.
B)   a consumption tax plan.
C)   the benefits principle.
D)   property tax assessments.E) A) and B)
F) A) and C)

Question 2

The U.S. federal government spends its revenues in a number of ways. Rank the following spending categories from largest to smallest.

Accepted Answer

A)   income security, health, national defense, net interest
B)   health, national defense, net interest, income security
C)   net interest, health, income security, national defense
D)   national defense, income security, net interest, healthE) A) and B)
F) None of the above

Question 3

A family's tax liability is the amount of money it owes in taxes.

Accepted Answer

A) True 
 B)False

Question 4

Table 12-20
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown.
 
-Refer to Table 12-20. Which tax schedules are proportional?

Accepted Answer

A)   Tax Schedule B only
B)   Tax Schedule B and Tax Schedule C
C)   Tax Schedule D only
D)   Tax Schedule A and Tax Schedule BE) None of the above
F) A) and B)

Question 5

If tax revenues from a tax on fried foods are used to pay for healthcare expenses related to cardio-vascular diseases, the fried foods tax could be justified using the .

Accepted Answer

The answer of If tax revenues from a tax on...

Question 6

Table 12-11
 
-Refer to Table 12-11. If Al has taxable income of $165,000, his average tax rate is

Accepted Answer

A)   26.6%.
B)   26.9%.
C)   27.3%.
D)   28.5%.E) B) and D)
F) B) and C)

Question 7

When the total surplus lost as a result of a tax is less than the amount of tax revenue collected by the government there is a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 8

Table 12-12
 
-Refer to Table 12-12. If the government imposes a $2,000 lump-sum tax, the average tax rate for Marcia and Charles would be

Accepted Answer

A)   5 percent and 6.7 percent, respectively.
B)   8 percent and 6 percent, respectively.
C)   12 percent and 9 percent, respectively.
D)   13 percent and 10 percent, respectively.E) A) and B)
F) A) and C)

Question 9

Table 12-10
 
-Refer to Table 12-10. If Miss Kay has $80,000 in taxable income, her marginal tax rate is

Accepted Answer

A)   15%.
B)   25%.
C)   28%.
D)   33%.E) B) and D)
F) B) and C)

Question 10

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) A) and C)

Question 11

If a tax takes a smaller fraction of income as income rises, it is

Accepted Answer

A)   proportional.
B)   regressive.
C)   progressive.
D)   based on the ability-to-pay principle.E) B) and C)
F) A) and D)

Question 12

Maurice faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. In addition, he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes. Maurice earns $60,000 per year in salary and another $10,000 per year in non-labor income. What is his average tax rate?

Accepted Answer

A)   17.19 percent
B)   46.69 percent
C)   48.87 percent
D)   56.01 percentE) None of the above
F) A) and B)

Question 13

How can a proportional tax achieve vertical equity?

Accepted Answer

Vertical equity is the idea that taxpaye...

Question 14

If Mary earns $80,000 in taxable income and pays $40,000 in taxes, her marginal tax rate must be 50 percent.

Accepted Answer

A) True 
 B)False

Question 15

Vertical equity is not consistent with a regressive tax structure.

Accepted Answer

A) True 
 B)False

Question 16

In order to determine tax incidence, one must

Accepted Answer

A)   consider issues of equity.
B)   also determine the legal liability of the tax.
C)   evaluate where the tax burden eventually falls.
D)   use the "flypaper theory" of taxation.E) B) and C)
F) A) and D)

Question 17

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

Accepted Answer

A)   marginal tax rate is 20 percent.
B)   average tax rate is 5 percent.
C)   marginal tax rate is 25 percent.
D)   average tax rate is 25 percent.E) C) and D)
F) All of the above

Question 18

Taxes can be justified if the government uses the revenue to (i)  provide public goods such as national defense.
(ii)  clean up negative externalities such as water pollution.
(iii)  regulate a common resource such as fish in a public lake.
(iv)  provide goods with positive externalities such as medical research.

Accepted Answer

A)   (ii)  only
B)   (ii)  and (iii)  only
C)   (i) , (ii) , and (iii)  only
D)   (i) , (ii) , (iii) , and (iv) E) None of the above
F) A) and B)

Question 19

A transfer payment is a government payment

Accepted Answer

A)   to companies that provide goods or services to government agencies.
B)   designed to transfer funds from one government agency to another.
C)   which transfers revenue from the federal government to state government.
D)   not made in exchange for a good or service.E) A) and C)
F) None of the above

Question 20

Which of the following statements about state income taxes is correct?

Accepted Answer

A)   Some states do not tax income at all.
B)   If states tax income, they must follow federal guidelines for designing the tax structure.
C)   States are not allowed to have a higher marginal tax rate than the federal marginal tax rate.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Exam 12: The Design of the Tax System

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

Correct Answer
verified

Vertical equity is not consistent with a regressive tax structure.

Correct Answer
verified

If a tax takes a smaller fraction of income as income rises, it is

Correct Answer
verified

A family's tax liability is the amount of money it owes in taxes.

Correct Answer
verified

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

Correct Answer
verified

If tax revenues from a tax on fried foods are used to pay for healthcare expenses related to cardio-vascular diseases, the fried foods tax could be justified using the .

Correct Answer
verified

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

Correct Answer
verified

Which of the following statements about state income taxes is correct?

Correct Answer
verified

When the total surplus lost as a result of a tax is less than the amount of tax revenue collected by the government there is a deadweight loss.

Correct Answer
verified

Table 12-10 -Refer to Table 12-10. If Miss Kay has $80,000 in taxable income, her marginal tax rate is

Correct Answer
verified

A transfer payment is a government payment

Correct Answer
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How can a proportional tax achieve vertical equity?

Correct Answer
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Vertical equity is the idea that taxpaye...
View Answer

In order to determine tax incidence, one must

Correct Answer
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Table 12-20 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-20. Which tax schedules are proportional?

Correct Answer
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The U.S. federal government spends its revenues in a number of ways. Rank the following spending categories from largest to smallest.

Correct Answer
verified

Table 12-12 -Refer to Table 12-12. If the government imposes a $2,000 lump-sum tax, the average tax rate for Marcia and Charles would be

Correct Answer
verified

If Mary earns $80,000 in taxable income and pays $40,000 in taxes, her marginal tax rate must be 50 percent.

Correct Answer
verified

Table 12-11 -Refer to Table 12-11. If Al has taxable income of $165,000, his average tax rate is

Correct Answer
verified

Exam 12: The Design of the Tax System

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

Correct AnswerverifiedShow Answer

Vertical equity is not consistent with a regressive tax structure.

Correct AnswerverifiedShow Answer

If a tax takes a smaller fraction of income as income rises, it is

Correct AnswerverifiedShow Answer

A family's tax liability is the amount of money it owes in taxes.

Correct AnswerverifiedShow Answer

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

Correct AnswerverifiedShow Answer

If tax revenues from a tax on fried foods are used to pay for healthcare expenses related to cardio-vascular diseases, the fried foods tax could be justified using the .

Correct AnswerverifiedShow Answer

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

Correct AnswerverifiedShow Answer

Which of the following statements about state income taxes is correct?

Correct AnswerverifiedShow Answer

When the total surplus lost as a result of a tax is less than the amount of tax revenue collected by the government there is a deadweight loss.

Correct AnswerverifiedShow Answer

Table 12-10 -Refer to Table 12-10. If Miss Kay has $80,000 in taxable income, her marginal tax rate is

Correct AnswerverifiedShow Answer

A transfer payment is a government payment

Correct AnswerverifiedShow Answer

How can a proportional tax achieve vertical equity?

Correct AnswerverifiedVertical equity is the idea that taxpaye...View AnswerShow Answer

In order to determine tax incidence, one must

Correct AnswerverifiedShow Answer

Table 12-20 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-20. Which tax schedules are proportional?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The U.S. federal government spends its revenues in a number of ways. Rank the following spending categories from largest to smallest.

Correct AnswerverifiedShow Answer

Table 12-12 -Refer to Table 12-12. If the government imposes a $2,000 lump-sum tax, the average tax rate for Marcia and Charles would be

Correct AnswerverifiedShow Answer

If Mary earns $80,000 in taxable income and pays $40,000 in taxes, her marginal tax rate must be 50 percent.

Correct AnswerverifiedShow Answer

Table 12-11 -Refer to Table 12-11. If Al has taxable income of $165,000, his average tax rate is

Correct AnswerverifiedShow Answer

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Vertical equity is the idea that taxpaye...
View Answer

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