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Exam 12: The Design of the Tax System

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Question 141

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In 2009, the top 1 percent of income earners

A) made about 13 percent of all income.
B) paid about 22 percent of all taxes.
C) made over 2.5 times the percentage of all income earned by the lowest quintile.
D) All of the above are correct.

E) A) and B)
F) B) and D)

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Question 142

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

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

E) C) and D)
F) A) and C)

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Question 143

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What are the two main sources of tax revenues for state and local governments?

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

When the government levies a tax on a corporation,

When the marginal tax rate exceeds the average tax rate, the tax is

Table 12-1 -Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. The deadweight loss associated with the tax is

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is regressive?

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

In 2010, the co-chairmen of President Obama's deficit reduction commission proposed curtailing or eliminating many tax deductions such as the one for mortgage interest. Economists who favor the proposal argue that it would (i) Correct a misallocation of resources because too much of the economy's capital stock is tied up in residential housing and too little is invested in corporate capital. (ii) Cut both spending and taxes. (iii) Encourage private philanthropy.

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 their

Table 12-7 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-7. For an individual who earned $35,000 in taxable income in both years, which of the following describes the change in the individual's average tax rate between the two years?

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Bill is a single person whose taxable income is $35,000 a year. What happened to his average tax rate between 2012 and 2013?

In 2010, the co-chairmen of President Obama's deficit reduction commission proposed curtailing or eliminating many tax deductions such as the one for mortgage interest. Economists who favor the proposal argue that it would (i) Correct a misallocation of resources because too much of the economy's capital stock is tied up in residential housing and too little is invested in corporate capital. (ii) Cut both spending and taxes. (iii) Encourage private philanthropy.

One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining

In which of the following tax systems do taxes increase as income increases?

One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining

If we want to gauge how much the income tax system distorts incentives, we should use the

A lump-sum tax minimizes deadweight loss.

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