Question 1

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Accepted Answer

A)   a progressive tax
B)   a proportional tax
C)   a regressive tax
D)   a lump-sum taxE) A) and C)
F) B) and C)

Question 2

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000.For a person earning $100,000,the marginal tax rate is

Accepted Answer

A)   30 percent,and the average tax rate is 50 percent.
B)   30 percent,and the average tax rate is 36 percent.
C)   50 percent,and the average tax rate is 40 percent.
D)   50 percent,and the average tax rate is 36 percent.E) B) and C)
F) A) and B)

Question 3

A consumption tax is a tax on

Accepted Answer

A)   goods but not on services.
B)   the amount of income that people spend.
C)   the amount of income that people earn.
D)   the amount of income that people save.E) C) and D)
F) A) and B)

Question 4

Taxes on specific goods such as gasoline and alcoholic beverages are called

Accepted Answer

A)   excise taxes.
B)   payroll taxes.
C)   sales taxes.
D)   social insurance taxes.E) B) and D)
F) None of the above

Question 5

Which of the following programs is not included in the federal income security spending?

Accepted Answer

A)   Social Security
B)   Temporary Assistance for Needy Families (TANF) 
C)   Food Stamps
D)   unemployment compensationE) B) and D)
F) A) and B)

Question 6

State and local governments

Accepted Answer

A)   are funded entirely by their own tax base.
B)   receive the majority of their tax revenues from corporate income taxes.
C)   are generally not responsible for collecting sales taxes.
D)   receive some of their funds from the federal government.E) A) and C)
F) All of the above

Question 7

The concept of a "welfare program" is most closely associated with which particular federal government program?

Accepted Answer

A)   spending on medical research
B)   Temporary Assistance for Needy Families (TANF) 
C)   Medicare
D)   Social SecurityE) All of the above
F) B) and D)

Question 8

Vertical equity and horizontal equity are associated with

Accepted Answer

A)   the benefits principle of taxation.
B)   the ability-to-pay principle of taxation.
C)   taxes that have no deadweight losses.
D)   falling marginal tax rates.E) C) and D)
F) None of the above

Question 9

Most people agree that the tax system

Accepted Answer

A)   should be both efficient and equitable.
B)   cannot raise enough revenue to cover government expenditures.
C)   would raise more revenue if tax rates were lowered.
D)   should be rewritten to require everyone to pay the same percentage of income in taxes.E) A) and B)
F) B) and D)

Question 10

Nancy paid a tax of $0.50 on the last dollar she earned in 1999.Nancy's marginal tax rate in 1999 was

Accepted Answer

A)   more than 50 percent.
B)   exactly 50 percent.
C)   higher than her average tax rate.
D)   lower than her average tax rate.E) All of the above
F) A) and C)

Question 11

The single largest expenditure by state and local governments is on

Accepted Answer

A)   highways.
B)   police.
C)   public welfare.
D)   education.E) B) and D)
F) All of the above

Question 12

List the three most important expenditure programs of the federal government.How do they differ from the three most important expenditure programs of state and local governments? Explain why it makes more sense for the federal government to purchase "national defense" rather than state governments.

Accepted Answer

The three most important expenditure pro...

Question 13

Scenario 12-4.A taxpayer faces the following tax rates on her income:
 
-Refer to Scenario 12-4.At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

Accepted Answer

A)   $42,000
B)   $57,000
C)   $60,000
D)   $80,000E) B) and C)
F) A) and D)

Question 14

A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

Accepted Answer

A) True 
 B)False

Question 15

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 average tax rate in 2010?

Accepted Answer

A)   24.1%
B)   26.4%
C)   27.8%
D)   30.9%E) All of the above
F) B) and C)

Question 16

Individual Retirement Accounts and 401(k) plans make the current U.S.tax system

Accepted Answer

A)   more like a consumption tax and so more like the tax system of many European countries.
B)   more like a consumption tax and so less like the tax system of many European countries.
C)   less like a consumption tax and so more like the tax system of many European countries.
D)   less like a consumption tax and so less like the tax system of many European countries.E) All of the above
F) A) and B)

Question 17

Table 12-9
The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income.
 
-Refer to Table 12-9.For this tax schedule,what is the total tax liability for an individual with $280,000 in taxable income?

Accepted Answer

A)   $105,700
B)   $108,900
C)   $111,600
D)   $117,300E) A) and C)
F) A) and B)

Question 18

Table 12-8
 
-Refer to Table 12-8.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 C)
F) B) and C)

Question 19

Table 12-16
The table below provides information on the 4 households that make up a small economy and how much they would pay in taxes under 3 types of taxes.
 
-Refer to Table 12-16.In this economy Tax A exhibits

Accepted Answer

A)   horizontal and vertical equity.
B)   horizontal equity but not vertical equity.
C)   vertical equity but not horizontal equity.
D)   neither horizontal nor vertical equity.E) A) and B)
F) None of the above

Question 20

If the rich pay more in taxes than the poor,the tax system must be progressive.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

Table 12-8 -Refer to Table 12-8.If the government imposes a $2,000 lump-sum tax,the average tax rate for Marcia and Charles would be

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A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

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Scenario 12-4.A taxpayer faces the following tax rates on her income: -Refer to Scenario 12-4.At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

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List the three most important expenditure programs of the federal government.How do they differ from the three most important expenditure programs of state and local governments? Explain why it makes more sense for the federal government to purchase "national defense" rather than state governments.

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Table 12-9 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-9.For this tax schedule,what is the total tax liability for an individual with $280,000 in taxable income?

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Table 12-16 The table below provides information on the 4 households that make up a small economy and how much they would pay in taxes under 3 types of taxes. -Refer to Table 12-16.In this economy Tax A exhibits

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State and local governments

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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 average tax rate in 2010?

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Nancy paid a tax of $0.50 on the last dollar she earned in 1999.Nancy's marginal tax rate in 1999 was

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If the rich pay more in taxes than the poor,the tax system must be progressive.

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Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

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The concept of a "welfare program" is most closely associated with which particular federal government program?

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Taxes on specific goods such as gasoline and alcoholic beverages are called

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Vertical equity and horizontal equity are associated with

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Which of the following programs is not included in the federal income security spending?

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A consumption tax is a tax on

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Individual Retirement Accounts and 401(k) plans make the current U.S.tax system

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Most people agree that the tax system

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Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000.For a person earning $100,000,the marginal tax rate is

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The single largest expenditure by state and local governments is on

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The three most important expenditure pro...
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